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Orders Of The Day

Volume 828: debated on Thursday 16 December 1971

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Consolidated Fund Bill

Considered in Committee; reported, without Amendment.

Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 93 (Consolidated Fund Bills), and agreed to.

Bill accordingly read the Third time and passed.

Iron And Steel Bill

Order for Second Reading read.

4.0 p.m.

I beg to move, That the Bill be now read a Second time.

Hon. Members will have seen the Memorandum on the Bill, published on 7th December, which explains the reasons for it, and, in particular, that the British Steel Corporation needs new borrowing powers to be authorised by Parliament early next year, when the current powers under the 1969 Iron and Steel Act are likely to run out. The Bill also provides for the write-off of capital and clarifies the powers and duties of the corporation. I shall come back to these matters later in my speech.

The House will see that the Bill is a further step in the series of measures the Government have been taking to place the steel industry on a sound and competitive basis.

First, there were the measures to improve the structure of the corporation and to rationalise the boundary between the private and public sectors of the industry. They were the subject of statements by my right hon. Friend the Secretary of State on 27th April and 28th June of this year. Since then the corporation has been engaged in a series of discussions with the other interests that have come forward.

Second, also on 28th June, my right hon. Friend announced decisions on the first stage of his joint Government—B.S.C. review. These included a higher level of investment for 1971–72—that was £242 million at 1971 survey prices—to allow the corporation to proceed with all the various projects it had decided upon, although without prejudging the results of the long-term review. That was substantially higher than in the previous year, when it was £152 million on the same price basis, and about three times the rate achieved over the few years before then.

We have always made clear that the long-term review would examine the main options open to the British Steel Corporation in the light of the demand levels which could be expected over the remainder of the present decade and beyond. As such it would identify the strategic options within which the B.S.C. should plan its main development pattern, so that particular proposals might be put to the Government in the light of an agreed assessment of the longer term situation. We expect this review to be completed—as announced last summer—around the end of the year, and it should be possible to make a further statement shortly after the House re-assembles.

The assessment of the future has been made more difficult by the notable change in the world steel environment over the past year, during which the main producing countries have experienced a sharp down-turn in demand. The forecasts of future growth of demand are being re-examined throughout the industry, and the steel industries of a number of countries are taking a further look at their capacity needs. For example, there is current speculation about the future growth of Japanese production, which may now be very substantially less than the 160 million tons earlier envisaged for the mid-1970s.

Similarly, in Europe the E.C.S.C. Commission now thinks it likely that production will be in the range 137 million to 148 million tons by 1975, whereas it had been thinking of a range up to 160 million tons by 1974. In the United States of America, although the effect on long-term plans is not yet clear, production this year is 8 per cent. below that forecast.

Those changes in the future world environment need careful assessment in relation to the prospects for our own steel industry, and the corporation has not yet reached a firm view as to the speed at which it may wish to introduce new capacity. Accordingly, we do not have firm proposals before us for major new development at a "brown field" or "green field" site, though the corporation is studying its position intensively with a view to being able to present conclusions to the Government by next summer.

In the meantime, we are anxious that there should be no avoidable delay in proceeding with the steel development programme to the extent that the future can be clearly seen. I am therefore able to announce that approval is being given to capital expenditure for 1972–73 of £265 million, that is at 1971 survey prices, subject to the reservation of only about £25 million in respect of certain major iron or steelmaking projects on which the board of the corporation has not yet reached final decisions, and which might pre-empt the question of major new development for consideration next summer. That amount is for the full expenditure proposed by the corporation for 1972–73 and provides for starts on schemes, some of which will come on stream in 1976 or later.

It will therefore enable the strategic development of the industry to proceed as the corporation has envisaged until the beginning of the second half of the 1970s, which is being considered in the current review. There is therefore no question of holding up any project on which the corporation has definitely decided. Moreover, the amount approved has been increased to allow the corporation to bring forward up to £10 million of minor projects which meet its profitability criteria, most of which are in areas of above average unemployment, and which can be started within about six months from now. The approval of £265 million is £23 million higher than even the record level for the current year and will also have beneficial effects for the plant and construction industries.

It is an inevitable consequence of major new investment that old plant should be phased out. The corporation is now proceeding with its plans for rationalisation. I know the necessity for this has always been well uncle stood within the industry—especially as there is the urgent need to get the corporation on to a more competitive basis. Indeed, the extensive reduction in manpower was both recognised and forecast at the time when the Labour Government re-nationalised the industry in 1967; rationalisation on this scale was one of the declared objectives. But it is particularly regrettable that this is now inevitably having such an impact on development areas due to the high concentration of plant in our older industrial centres.

However, both the Government and the corporation are determined that the B.S.C. should move into profitability as soon as possible; and the White Paper makes clear that the corporation has undertaken to make a profit in 1973–74 and to maintain it at a satisfactory level thereafter, subject to the normal uncertainties of the steel industry.

In the meantime, the corporation has an accumulated loss of £40 million, and is expecting to make a loss of £100 million in the current financial year, and a similar loss in 1972–73. When the House was informed of the loss for this year on 28th June, the corporation's plans included the intention to operate a more selective arrangement for steel price increases. This was, however, shortly afterwards overtaken by the C.B.I.s initiative on prices generally. The corporation is currently adhering fully to a strict interpretation of the C.B.I.s initiative and will consequently not be able to increase its prices until next April, and then only by 5 per cent. It is too early to say what will be the position after July, 1972 when the period covered by the present initiative ends. As from the end of 1972, however, the corporation should be operating under the pricing arrangements of the European Coal and Steel Community, under which there will be no statutory provision for the control of prices.

While these and earlier measures of price restraint, under successive Governments, have to some extent contributed to the corporation's financial difficulties, there are other important factors, including the effects of the threat of nationalisation on the steel companies' investment in the mid-1960s and the low level of investment by the corporation up to and including 1969–70, which have had a marked effect. The work involved in the merging of the companies following nationalisation and the successive changes in the corporation's own organisation has doubtless also contributed.

Of course there is still some way to go, but I am sure hon. Members will agree that it is very important for the health of the steel industry that the corporation should operate efficiently and profitably as soon as possible. Meanwhile, we have to deal with a situation in which the corporation is faced with the heavy losses I have described at a time when the essential modernisation programme is demanding substantial investment. These losses might amount to up to £250 million by the end of 1972–73 and there is no prospect that they can be recovered in the foreseeable future. Accordingly, the Government have decided to provide for these losses to be written off from the balance sheet when they occur. The Bill therefore includes provision for writing off part of the capital of the corporation so that a reserve can be created for this purpose.

It is, of course, normal for a large industry to carry a reserve as part of its capital employed in order to meet contingencies and costs of an exceptional nature. This is no less desirable for the steel industry, which has to face special costs, including, for example, the closing and replacing of obsolete plant. The steel industries of other major producing countries have reserves for such purposes and it would be appropriate for the corporation also to have the flexibility that a reserve allows.

We therefore propose that the size of the reserve for the corporation should be increased by a further £100 million after allowing for the provision against losses of up to £250 million—this will give a total reserve initially of up to £350 million. In order to provide for this reserve, it is the intention to reduce public dividend capital by £200 million immediately under Clause 1(1), and the corporation's loans from the National Loans Fund by up to £150 million, under Clause 1(2), when a financial objective has been set.

All these sums—that is, up to £350 million—will be put into a general reserve, the use of which will be controlled by the Secretary of State under Section 17(4) of the Iron and Steel Act, 1967. We expect that up to about £140 million of accumulated loss will be written off from this reserve next summer, to clean the balance sheet to that date, and a further sum of up to about £100 million in mid-1973, though the corporation will be expected to keep this to a minimum. Thereafter, the reserve will continue on a permanent basis of about £100 million and the use of the money provided by the current legislation will continue to be subject to Ministerial direction. Our intention is that it should not be used for writing off further trading losses after 1972–73, but only for meeting exceptional costs.

After returning to profitability in 1973–74, the corporation intends to set aside sums to the reserve from retained profits, after adequately remunerating the Government on its public dividend capital.

My hon. Friend says that the sum could not be used for writing off after 1972–73. Is this because he is advised that under the Treaty of Paris such writing off would be deemed to be subsidised competition?

No. It is because the corporation itself will be contributing to the reserve, hopefully, from its own retained earnings which it will use for these other purposes. Naturally, as my hon. Friend points out, the new environment in the European Coal and Steel Community, into which the corporation will be entering, undoubtedly has a very marked bearing on the extent to which it will be possible for the corporation even to appear to be subsidising its operations. So it will have to perform in a normal commercial manner in this respect, as in all others.

I am intrigued by the criterion that the corporation must go into profit in 1973–74. I find this hard to fathom; I am not an economist. It expects to lose next year £100 million, which means that it will have to earn at least £100 million more in the fateful year of 1973–74. What is likely to happen next year and in 1973–74 to bring about this great turn-round in the earnings of the corporation? Is it going to put up prices? Is it going to accelerate the closure of unprofitable plant? Will the hon. Gentleman say more on this subject?

The corporation will certainly in the years ahead—in each year—be able to trade at a profit. The question of accumulated losses from the past is provided for in the writing off proposals of the Bill. I think the hon. Gentleman will see that, as a result of clearing the decks, as it were, the corporation will be in a better position in future, as though it had made provision in each year for the building up of its reserves out of its earnings.

I do not know whether the hon. Gentleman wishes to argue this point backwards and forwards now, but I think it would be more convenient if he were to make his own speech later on.

The use of this reserve will provide, for example, a means of making a contribution towards the additional cost of replacing fixed assets, arising because of the effect of inflation.

As the White Paper explained in paragraphs 12 and 16, it is not the intention to use the power to reduce the National Loans Fund's loans by up to £150 million until a financial objective has been set. The objective will be determined in the light of the long-term review and the corporation's next five-year financial and development forecast, due next spring. It will require the corporation to earn a satisfactory return on the capital invested in it over a period of about four or five years, starting in 1973–74—the period to, say, 1977–78. To this end, over the coming months I shall be discussing with the corporation the implications of various rates of return and other possible indicators of performance.

The borrowing limit proposed in the Bill is £1,250 million to cover the period to 1974. This is a net increase of £600 million on the previous limit of £650 million under the 1969 Act. But, because up to £150 million may be written off outstanding borrowing, the effective increase is up to £750 million of additional borrowing. The new limit is intended to cover the same period—to 1974 or so—as the previous limit, because we are not yet in a position to chart more precisely the future lines of development of the industry looking to years beyond. But it will enable the corporation to get ahead with all the schemes it has in hand or may propose for the immediate future, subject to the Secretary of State's approval of the general programme of capital development under Section 4 of the 1949 Act.

Finally, I should explain that we have taken the opportunity of this Bill to include a clarifying provision designed to put beyond legal doubt that the B.S.C. has normal freedom to dispose of iron and steel assets when it believes it to be in its own interests to do so; and also to cease to supply iron and steel products if, for example, this becomes uneconomic. No such doubt exists in respect of the corporation's non-iron and steel assets.

Hon. Members will note that the Clause does not give the Government new powers; it is no more than a clarification. It does not enable the Government to direct the corporation to do things it is not minded to do voluntarily as being in its own best interest. It merely puts it beyond doubt that the corporation can cease to supply and can dispose of assets if it wants to. This will enable the corporation to sell plant as a going concern instead of closing it, with more serious consequences for employment, and to proceed without legal reservation with the implementation of the structure proposals it has agreed with the Government.

We look ahead to the prospects for the corporation in the enlarged European Community. There is no doubt that, while the competitive pressures will be greater, the opportunities for the industry will be equally real. We shall certainly take these into account when working out the long-term strategy for the industry. Meanwhile, the provisions of the Bill will enable the corporation to prepare for the future, unencumbered with the burden of past debt, backed by an adequate operational reserve, and with the benefit of a high current level of investment. I have no hesitation in commending the Bill to the House.

4.21 p.m.

The Minister for Industry has moved the Second Reading in a non-controversial tone. I cannot guarantee that I shall speak entirely in that sense except to the extent that that is my normal custom and nature.

However, there are features of the Bill which we are happy to welcome, which makes a nice change. We are glad that the Government have come forward with proposals to alter the capital structure of the British Steel Corporation and to improve its borrowing facilities. We are glad that the corporation is to have the reserves which it will be accorded under these arrangements. There are other consequences of the Bill which we welcome.

However, there are also features of the general situation in the industry which we find distinctly disturbing, to put it no higher. We wish to raise some of these matters in the debate because they are covered by the Bill. The Bill deals with huge sums and the huge sums are an indication of the central place which the industry occupies in the British economy. It is because we on this side have always held the view that there should be a strongly supported expanding steel industry that we believe that it is so important for these matters to be properly investigated, and the Bill gives us an opportunity to do that. We therefore propose to raise these matters both on Second Reading and in Committee, where some detailed questions will no doubt be raised.

I am not sure that Clause 2 is as innocent as it looks—and it does not look all that innocent—for two reasons, on which we hope to secure more information during the debate, because the replies may well influence the Amendments we may wish to table in Committee. The disposal of assets and the rights and duties of the corporation and of the Minister are specified in previous Iron and Steel Measures. Under those Measures, when the Minister wished to influence the corporation to dispose of any assets he had to make an order which was subject to the negative procedure of the House of Commons.

Will Clause 2 alter in any sense the powers of the House or those of the corporation qua the disposal of assets? If the argument is that this provision is merely a clarifying statement, it is a rather cumbersome way of proceeding. However, this matter can be further discussed in an effort to ensure that the corporation is not being given greater powers in the disposal of assets and that the Minister is not being freed from the control of the House of Commons.

An even more important aspect is that if the Government propose to proceed with their plans to secure entry into the European Economic Community, they will have at an early date to introduce a Measure to deal with this industry. Most of us on this side are strongly opposed to the House surrendering the authority it has over the steel industry. If that power is to be surrendered, as it must be if we are to enter the Community, it must be done by Act of Parliament. We are not prepared for it to be done by some backstairs huggermugger manoeuvre. I am sure that the Government would not attempt that once the matter had been brought to their attention, as it is being brought to their attention now.

When such a Bill is introduced will be the appropriate time to deal with any question affecting the disposal of assets or the relationship between the Government and the industry. What could be more appropriate than a Bill dealing with the corporation's authority and that of the Government and their respective responsibilities? Perhaps it would be simpler to delete the Clause from this Bill and put it into the new Bill. I hope that before we reach the end of tonight's proceedings we shall be told that the Government are to introduce a major Bill affecting the future relationship between the Government and the corporation. We should also be informed whether the coal industry is to be dealt with in two Bills or in one.

There is also the question which has been raised by the hon. Member for Oswestry (Mr. Biffen) and to which he received such a succinct, aphoristic reply from the Minister. I hope that we shall have replies of equal bevity throughout the rest of these proceedings. The answer is that if we were a member of the Community it would not be possible for the Government to introduce an essential Measure of this kind, as the Minister described it, for the relief of the steel industry, an essential Measure for the provision of the necessary investment in the industry, an essential Measure for the protection of the employment of those working in the industry.

Both sides of the House will approve the Bill; there will be no vote against it, not even by the two hon. Members on the Government side who were so passionate in their opposition to any proposition such as this when they were in opposition. Everyone will agree that these financial provisions are necessary and essential to the health of the industry. Will the Government acknowledge what cannot be gainsaid, namely, that a Measure which is so essential for the industry's salvation would not be possible if we were a member of the Community? We could not engage in such a rescue operation to help a major industry such as steel or coal, and my hon. Friends representing the coal constituencies have also recognised this.

The kind of provision we had to have some years ago to assist the coal industry to overcome great difficulties was essential for its survival, but that kind of provision will not be possible if we enter the Community. I hope that it will be well understood by everyone that this kind of Measure to help a key industry in our economy will not be possible if by any mischance the country makes up its mind in the last resort to enter the Community.

I now come to some of the other matters on which the Minister touched and which he did not elaborate but should have elaborated. We have had a White Paper, the Minister's speech and the Bill, but many matters affecting the steel industry's finances are still concealed from the popular gaze. The hon. Gentleman skirted around them today.

For instance, what is the effect of the Government's interventions over prices? The Minister referred to this, as does the White Paper. They acknowledge, as they must—just as they have to acknowledge that we could not do this in the Community—that the interventions by the Government in fixing prices in the steel industry have had a big effect on its profitability.

It is ironic that the industry was denied the right, which most private industries had for a number of years, to be able to fix its prices as it wished. Then there was the arbitrary intervention of the Prime Minister, resisted by the Secretary of State for Trade and Industry—but he was overborne—which stopped the industry putting up its prices last year as it wished to do. We then had the arrangements announced when we last debated steel, that the industry would now be permitted the kind of freedom in fixing prices which it had desired. Within a few weeks or months, the corporation was told that once again the Government had altered their plans and that there would be direct intervention to ensure that the industry did not go beyond the arrangement which was being made with the C.B.I. and some other industries.

We have never objected to Governments taking powers at certain times to interfere in the price levels of nationalised or private industries. We have never said that we are against all forms of price control. Of course not. But what we do object to is unfair intervention against publicly owned industries, coupled with attempts later on to pillory those industries for not making profits. That has been the situation of the British Steel Corporation and it would have done credit——

The hon. Gentleman shakes his head. Then let him put it in his White Paper, for it is not there. His right hon. Friend is to wind up and he will be the proper person to discuss this matter. I have here great chunks of his speeches saying that he was opposed to any intervention in the price levels of these industries, that they should be free to fix their prices as they wish.

I am only asking for an estimate of the burden imposed upon the British Steel Corporation—if the Government think that it will make the calculation more palatable for publication—by both the previous Government and the present Government. In the current year, what are their calculations of the losses of the corporation as a result of this intervention? This is a very appropriate figure to make public, since it affects the whole question of whether the steel industry has been working efficiently or not. So I hope that the Minister will state these figures much more plainly.

Then there is a whole series of other figures which we would like to have, about which the hon. Gentleman and the Government have been so bashful in preparing for this debate. What have been the economic or financial consequences for the British Steel Corporation of the Government's investment grants policy? The Minister made great play, as he is entitled to do—not as a Government statement but as a general proposition—with the £265 million investment programme for the coming year. Certainly, all of us from steel constituencies are strongly in favour of the increase in the investment which has gone into the steel industry.

One of the main reasons why we favoured public ownership was precisely that we believed that there had been much too little investment. When the industry was taken over, investment was about £60 million a year in 1971 prices, quoted by the Minister. Last year it was up to £152 million and now it is to be £265 million. I am all in favour of this increase, particularly because many of these items of investment have been voted by the Government. I am not saying that that makes it more certain that they are correct, but it means that the Government cannot cavil at such moneys being spent.

I am in favour of the increase in investment, but what is the extra burden which has been put upon the corporation by the change from investment grants to investment allowances? How much of that £265 million this year would have been written off or taken into account in investment grants because so many of the great steel companies are in development areas? The Government wished to present a clear picture of the steel situation to the country and the House, yet they produced a White Paper without even mentioning investment grants and the effect of the change.

The hon. Member also discussed, again in very meiotic terms, the lack of orders for the steel industry and the difficulties that it was encountering in the world situation. The hon. Gentleman is entitled to describe that and also the weakness of our situation. Because of the general malaise of the British economy, which has had one of the most serious effects upon the steel industry, there has been a fall in steel production of about 19 per cent. from last year to this year, and a fall in home consumption from 15 million to 13 million tons. These are heavy falls, due no doubt to the general fact that the Government have not properly conducted the affairs of the economy as a whole.

Thus, in such a debate as this, even when Conservative spokesmen have abandoned most of their attacks upon publicly-owned industries—there may be a few bleats from the back benches on this subject—we must take into account the factors which have influenced the figures which made the Bill necessary. The first is the intervention on prices, the second the withdrawal of investment grants and the third the general weakening of the economy as a whole and the demand for steel.

All those factors together have produced a serious situation for the industry but could have produced a catastrophic situation in the country as a whole if the steel industry were now in private hands. But for the fact that we have had a publicly-owned industry fighting to protect is rights and directly contesting the "lame duck" logic of the Prime Minister—[Laughter.]—it is all very well for hon. Gentlemen opposite to laugh; it is clear that what I am saying it true—we would have had in the past year under the Conservatives a dozen Upper Clyde situations in the steel industry.

Before the hon. Gentleman takes off further into these flights of fancy, may I ask him to accept that the steel industry would have been in much better shape to face the difficult economic circumstances of today if there had not been so much distraction in the last 20 years or so because of the Labour Party's obsession with nationalisation?

We have had this argument before with the hon. Gentleman. It would take a long time to develop the point in detail and he is wrong to adduce it in this case.

Prior to the industry being brought into public ownership the old steel masters—and I seem to recall the hon. Member for Cambridge (Mr. Lane) being involved in those arguments—were telling us how efficiently the industry was being run, how unnecessary it was to have any change in ownership and how everything was going ahead splendidly. That was being said at a time when investment in the industry was running at under £60 million a year. They were known as the famine years from the investment point of view. We do not have to go over this argument and I am surprised that the hon. Member for Cambridge even raised it. Anybody who knows anything about the steel industry will not attempt to defend the record of the old steel masters.

I am perplexed by the hon. Gentleman's reference to the famine years for investment. The figures of investment for the steel industry are as follows: 1960, £167 million; 1961, £230 million; 1962, £193 million; 1963, £107 million; 1964, £93 million; 1965, £86 million; 1966, £90 million; and then the figures are £93 million, £73 million, £74 million and £39 million. The famous year was 1969–70 when it never exceeded £39 million.

I do not know whether the Under-Secretary is seriously suggesting that that counters my argument. He must know that major steel investment in this country in the 10 years prior to nationalisation at Llanwern and Ravenscraig took place primarily because of the plans that had been drawn up by Richard Thomas & Baldwin, which at the time was in public hands. In other words, major investment took place in the one sector of the industry that was publicly owned.

I must correct the hon. Gentleman. He is leaving out the complete restructuring of the entire Consett works with new furnaces during this period.

Hon. Gentlemen opposite must get themselves sorted out. First we are told that there was not sufficient investment in the steel industry during this period and now we are told that for one reason or another investment was perfectly satisfactory. I am saying that on any basis investment was nothing like sufficient. We are now getting back to a level approaching something rather better, but the figures of £265 million about which the Government are boasting will be nothing like sufficient to do the job.

I intervene simply to put right a point made by the hon. Member for the New Forest (Mr. Patrick McNair-Wilson), who referred to investment in my constituency. I remind my hon. Friend that the Benson Report was held up by the Conservatives as a so-called alternative to nationalisation, and that envisaged the phasing out and closing down of the Consett steel works.

My hon. Friend's intervention reinforces my argument. Hon. Gentlemen opposite are anxious to draw attention away from the fact that many of the nation's great steelworks have been running at a loss in the last year and a half, largely because of the influences I have described and, in particular, the way in which the Government have been running the economy as a whole. If the Government had applied their "lame duck" logic of not subsidising anything because everything must make a profit, we would have had a dozen Upper Clyde situations in steel at the River Don, at Shotton, perhaps at Ebbw Vale and elsewhere. Hon. Gentlemen opposite cannot deny this.

Under this Bill the Government are providing extra money from the State or community, in my view rightly, to subsidise—I use that horrible word for the benefit of hon. Gentlemen opposite—and ensure that industries might might otherwise go out of business can be sustained for the benefit of the nation.

I cannot imagine how the Under-Secretary had the gall to intervene when in discussing the previous Measure he was one of the "bowling alley boys" who demanded that we should not give any extra money to the steel industry if it was not making a profit. He would have cut it off without a shilling, if not a penny.

I come to another aspect of the way in which the Government have been dealing with this question, and in so doing I imagine that I shall have universal approval for my case. It is clear that the way in which the steel industry has been conducted in detail in the past few months is something that Parliament should tolerate no longer.

The Minister told us that he would be producing a new statement very soon on the findings of his joint steering group. I understand that that will be done soon after the recess. It is a strange way of proceeding that we should have this Bill dealing with the borrowing powers of the industry for two or three years ahead, then a report in January or February on the results of the joint steering group, which is supposed to govern the whole future of the steel industry in the next 10 to 20 years, if not longer, and later next year we are to have a further Bill to hand over the affairs of the steel industry to the high authority in Europe. This is a most muddled way of dealing with these vital issues.

I have said to the Government before that the joint steering group method of running a great industry should no longer be accepted. It is a procedure which has been condemned in every quarter of the House. Businessmen have condemned the idea of having blurred responsibilities between those of the State and those of private industry. The Committee on Nationalised Industries, which examined these matters in great detail, said that in the relationship between Government, Parliament and the nationalised industries we should try to draw the responsibilities as clearly as possible so that everyone knows what to do. That is quite different from the way in which this joint steering group has been running the steel industry during this period.

As it is the Christmas period, perhaps the best way I can describe the joint steering group is as a constitutional pantomime horse; nobody knows who is looking after the front legs or the back ones, and there is a congenital lack of cohesion between the two, with a sag in the middle where the right hon. Gentleman the Secretary of State is accustomed to sitting.

That is quite wrong. The Tories promised disengagement and said that they would not run the steel industry on a day-to-day detailed basis, with Civil Service intervention, but the joint steering group is presided over by civil servants. The group has a civil servant in that Ministry, with representatives from the Iron and Steel Board. Lord Melchett goes to the meetings, with this body sitting there. They are discussing matters of paramount importance for the industry's future.

When the Secretary of State generally described what the joint steering group was doing in the debate on 24th May, he said:
"It will be a mammoth task to perform. It will cover the following matters: the expansion of, and consequent investment by, the Corporation at home, including the principle of a major new green field site."
He goes on to detail the various matters that will be looked at and ends by saying that it will be a major exercise and
"It will concern itself with the critical importance of the industry to the Government's regional policies, bearing in mind that, today, about 50 per cent. of the Corporation's manpower is employed in development areas."—[OFFICIAL REPORT, 24th May, 1971; Vol. 818, c. 74.]
So a report about these major questions governing the whole future of the steel industry is to be incorporated in a statement to be made to the House as a result of the findings of the joint steering group. When that report is made, how shall we know which recommendations are supported by the Government, or which are the recommendations of the British Steel Corporation, or whether there has just been a compromise between the two? How shall we know whether it is the Government which have brought pressure on the British Steel Corporation to do something that it has not desired or vice versa?

That is why I say this is the very worst way of running a nationalised industry. It is no use hon. Gentlemen opposite saying, "Oh no, this is nationalisation". This is not nationalisation. It is a system devised by the right hon. Gentleman, certainly in complete breach of everyone's election pledges. Not only did the Conservatives break their pledges, but they broke everyone else's pledges as well. They said that they would have a period of disengagement. No one could call this disengagement.

If Ministers are not prepared to accept their responsibilities, it is an affront to the constitutional procedures that we normally accept in the House. That is what it amounts to.

The real reason for this system is that, partly, the Government want to shield behind the British Steel Corporation for many of their proposals. We have seen how they have done that before. It is partly because they have not thought out properly the part that the steel industry should play in the general future economy of the country. It is partly because they are still obsessed by the doctrines of right hon. and hon. Gentlemen on the Front Bench. I will not quote the speeches they made in Committee, in which they denounced the whole idea of going forward with major investment in the steel industry unless it could be proved immediately profitable.

We on this side of the House take the view that the joint steering group should be brought to an end immediately, and that such an experiment for running our nationalised industries should never be attempted again. I am sure that the British Steel Corporation is thoroughly opposed to this method of running the industry. That would be the view of anyone who has any experience of running a nationalised industry. It is civil servant government of the worst type. It should come to an end immediately.

We are particularly eager that the responsibilities should be defined because the whole future of the industry may now be at stake. Some alarming questions have arisen about what has been discussed in this joint steering group. Some alarming rumours have circulated about the scale being considered for the steel industry in this country.

When the joint steering group was set up, and when the Secretary of State made his announcement in May, he said that the report, when we had it, would include a major new green field site: and I assume that he also considered then that it would include proposals for going ahead with a brown field site, which has been previously discussed. All these matters we hoped would have been clarified by now between the British Steel Corporation and the Government. Declarations could have been made to the country and to the steel industry as a whole that we proposed to go ahead and build up an industry producing at least 40 million tons a year. That was what the British Steel Corporation had in its original development plant. Everyone understands that the cost of that plan must have increased. It would be bound to increase. The longer one delays it, the more expensive it will be, in one sense. But we would hope that there is no departure from that plan, and, therefore, what the steel industry requires is plain statements from the Government and the corporation together that there is no retreat from that major expansion scheme and that the Government are to provide the money necessary for the major scheme and not for some pale imitation of it.

That is why we say that it is a very clumsy, second rate way to deal with a great industry—to have the Bill dealing with the finance for the next two or three years now, then to have an announcement about the major scheme in January, and then to have later proposals which will take away authority from the House about whether we shall have a major expansion in the industry.

Moreover, it is not only a question of the steel industry but also one of the whole future of many of our regions, as the Minister acknowledged in May. He said:
"It will concern itself with the critical importance of the industry to the Government's regional policies."—[OFFICIAL REPORT, 24th May, 1971; Vol. 818, c. 74.]
We know very well that during the last few weeks there has been a major change in the thinking of many people about these regional policies and how they will be affected by our entry into the Common Market, if by any mischance that happens. People are beginning to understand that if we are moving towards a monetary union of some kind, or back to fixed parities of some kind, it will be very dangerous for many of our regional areas, which could then be assisted only by subsidies or by aid on a far bigger scale than previously contemplated. The Governor of the Bank of England is coming around to this view, saying that we have to have a much bigger regional policy if we are thinking of going into such a contraption as the monetary union which might be established. So the whole perspective is changing.

The steel industry must play a major part in our development of the regions. I am sure that the House will have read what was said in the statement issued by the BISATKA, the biggest union in the steel industry, in which it protested—as others have protested before—at the idea that the Government or the British Steel Corporation should engage in discussion about entering into arrangements for building a new steel industry on the Continent of Europe or outside the regional areas where it is so essentially required.

The decision as to where to build steel works is a matter which should be settled in the last resort by the collective representatives of the people or by people answerable to them. That is what we on this side of the House claim. But that will not be possible if we are not to have the detailed proposals of the British Steel Corporation and of the Government laid before the country as a whole so that they can be discussed and so that we can see exactly what is being done.

We are deeply dissatisfied with the way in which the Government have sought to conduct the affairs of the steel industry. The abortion of a joint steering group should be brought to an end at once. The House should be furnished with the clearest account of what it is that the Government recommend and what it is that the corporation recommends, and then the House should pass judgment upon it. There are many of us here, and, I believe, an increasing number throughout the country—we already have a majority, and that is a flying start—who will be opposed to saying when we have the debates during the coming year that we should hand over the control of such an essential industry, which can play such a big part in our regions, to an authority not answerable to the House. Therefore, the Government had better make preparations very soon to give the House much fuller explanations than they have given us today.

5.1 p.m.

When the hon. Member for Ebbw Vale (Mr. Michael Foot) referred in his closing sentences to an authority not answerable to this House he was talking about the steel industry which I and my hon. Friends would have liked to see, one which is not in Government hands. Whilst I agree that the British Steel Corporation will not always be subject to some element of political control, the only way in which we could have established the freedom which the hon. Gentleman desires and I certainly desire would have been to leave it as a private enterprise industry. The hon. Gentleman is very naive if he suggests that we can ever have a nationalised industry without an clement of Government control.

I share many of the views the hon. Gentleman expressed. In the debate on the Civil List a number of Labour hon. Members were quick to point out that we are the guardians of the taxpayers' money. I hope, therefore, that I shall carry them with me in my brief remarks on the steel industry today.

It is no secret that the nationalised industry came into being for political rather than commercial reasons. The late Lord Dalton, in his book "High Tide and After", said that he was responsible for the introduction of the nationalisation of the industry into the Labour Party's policies. Be that as it may, we have lived with the shuttlecock for a long time.

We are discussing a Bill to restructure the industry's finances. I cannot help remembering the words of the right hon. Member for Barnsley (Mr. Mason) when he opened the Second Reading of the 1969 Iron and Steel Bill. He said:
"The Bill puts the industry in a position to master the industry's problems and achieve successs …
"In asking the House to give the Bill a Second Reading we are enabling the B.S.C. to weld itself into a strong, internationally-viable steel industry …"—[OFFICIAI. REPORT, 8th May, 1969; Vol. 783, c. 692–693]
That was over two years ago, and unfortunately, but predictably, the industry is back here today asking for more money.

It is because the failure to achieve the objectives which the right hon. Gentleman set out, with which I wholeheartedly agreed, that we find ourselves faced with a desperate rescue bid. We know that under the rules of the E.C.S.C. unfair subsidisation is forbidden, and if we do not do the financial restructuring of the industry now we shall run into serious trouble when Britain enters the E.E.C. Reading between the lines of what my hon. Friend the Minister for Industry said, we saw clearly that that was in his mind, too.

The sum of £350 million is to be written down. It is not to be dismissed from the record altogether, but the charge is merely to be handed on to the taxpayer. Borrowing powers are now up to £1,250 million. What a far cry that figure is from the £300 million when the industry was nationalised! If the Bill will provide the necessary rescue operation, well and good. We shall all be delighted. No one wants to vote the Bill down, because we all hope that it will provide that rescue.

But there are certain questions which my hon. Friend will have to answer. The first relates to the financial objective. It is beyond the capability of any hon. Member to talk intelligently about the industry without knowing what that objective is to be. Until it is set, it is impossible to know whether the figures we shall be voting in the Bill are the right ones.

Second, we must also know what the investment policy is to be. The sum of £1,250 million may seem a lot of money, but against a background of a lot of investment policies of which we have no knowledge it may be inadequate. My hon. Friend said that early in the New Year we shall be given the long-term background, setting out what the investment plans are to be, but it nullifies part of today's debate if we do not know how the money is to be invested.

The third question is perhaps not so important, but it is relevant since we are talking about spending taxpayers' money. What savings can be made from hiving off? Figures have been suggested, but no firm figure has been given by the Government. We should have such a figure to set against the very large sums which are to be spent.

The fourth question concerns the pricing policy. How can we have a nationalised industry competing on all fours with commercial enterprise if the prices are to be fixed in an arbitrary way? I said when the first attempt to fix the prices was made some months ago that if we had had real flexibility of pricing which the industry so desperately needs we should have been able to take advantage of the shortage of structural steels when that situation occurred about 18 months ago and the industry could have recouped some much-needed money, but because we were unable to do so that opportunity passed us by. There was a Press report the other day that there are to be price cuts. So be it. But just how flexible is the pricing policy? I believe that it will be central to the industry's commercial success.

Is the hon. Gentleman aware that the industry generally, in Europe and in this country, is at a low ebb? People requiring structural steel, other reinforcing bars and so on are shopping around the world for job lots at give-away prices, and then when boom conditions return to the industry and European producers are charging blackmail prices because they can sell anywhere those consumers blame the corporation because it cannot provide what is wanted. If one does not stick by one's producer in bad times, is it not right if the producer tells one to go to hell in good times?

I am grateful to the hon. Gentleman for his intervention, because that is exactly the point I was coming to next. The chairman of the corporation said at the annual luncheon of the British Independent Steel Producers' Association yesterday almost exactly what the hon. Gentleman has just said. He threatened those who bought their steel elsewhere that when boom times returned they need not look to the corporation to supply them. That is not the sort of talk that will restore the con- fidence which I should like to see in the industry.

It may well be that there was a time when people were shopping around. They naturally bought here because our prices were so low. That is why I was saying that if we had put up our prices we would have been able to take advantage of that situation. I do not think the chairman of the corporation was wise to level threats of that sort at customers who buy their steel elsewhere. We have to produce a product at the right price, of the right quality, at the right time. This ultimately is what will decide the corporation's future. I can understand the concern being expressed by the British Independent Steel Producers' Association and the particular companies.

Mr. Halahan asked yesterday at the annual meeting how independent companies were to survive when the Government provided lavish hand-outs to the British Steel Corporation but the independent producers got nothing. He has a good point, and I will read a couple of sentences from his speech. He said:
"The writing-down of capital debts by the Government for one part of a competitive Industry and not the other is unfair to say the least, and furthermore may not endear our industry in the new European scene. But for this to be used to ensure that price increases will be restrained to 5 per cent. next April, and further restrained throughout 1972, whatever the market circumstances, would be a savage blow at the financial prospects of the private sector, on whom cost increases already bear no less hardly than on the Corporation."
If we want a total steel industry package—and the Secretary of State has pointed out that for as far as he could see bulk steel making would be in the hands of a nationalised corporation—and if at the same time we also want to enjoy the benefits of the private sector—and no one has suggested that we should not—it cannot be fair to give the public sector all sorts of advantages withheld from the private sector. Mr. Halahan has a real point. If we have to compete in Europe we shall need to have the industry in tip-top shape right the way through, not just odd individual elements.

I return to this financial objective. While I hesitate to remind my hon. Friend the Minister for Industry, he has always made this point most strongly and his remarks during the Second Reading debate on the last Iron and Steel Bill on 8th May, 1969, were clear beyond doubt. He said:
"It is most important to get this right, for unless the target set represents a reasonable return on assets, the servicing of capital will be inadequate and the corporation will have further unfair advantages over the private sector." —[OFFICIAL REPORT, 8th May, 1969Vol. 783, c. 778.]
I am sure that my hon. Friend has not forgotten that. I know him to be a man of great integrity and I am sure that he will honour this because it is of great importance.

We have to remember that it is the management of the corporation which must ultimately bear the responsibility for its success or failure. If my hon. Friend will establish with the chairman and the board of the corporation the financial objective which they and he accept, it is then desirable to say to the chairman and board, "If you do not achieve this objective you will be replaced by another chairman and another board." The people of this country have since nationalisation accepted a lot of promises and false horizons with this industry. They have a right to ask the management to get the situation right, and if it cannot, to say that it should make way for someone else.

This is fundamental. We must be clear about the objectives and if they are not met we must replace top management or once again we shall see a nationalised industry travelling down that well-trodden path—[Interruption.]—that much loved path to the taxpayers' pocket. As I said in the debate on public expenditure—and I apologise to the hon. Member for Penistone (Mr. John Mendelson) who apparently raised a point of order after I left the Chamber to attend a meeting with the chairman of the Forestry Commission—the taxpayer will pay for excellence and good value and he has a right to both. As yet the corporation has not provided either.

5.15 p.m.

My hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) and the hon. Member for the New Forest (Mr. Patrick McNair-Wilson) mentioned two matters which the Government must clear up. The question of what control the House will have over the reconstruction of capital in a nationalised industry if and when we enter the European Economic Community is of vital consequence. The hon. Member mentioned differences between nationalised industries, where we reconstitute the capital in this House, and private enterprise. Private enterprise is quite used to reconstructing its own capital. Would there be any difference upon entry to the Community in the ability of private enterprise to reconstitute its own capital, especially in the circumstances described by the hon. Gentleman where reconstitution of the nationalised sector may have repercussions on the other part of the industry?

No one is quarrelling with the reconstruction suggested in Clause 1, and I would be the last person to disagree. My hon. Friend reminded us that I wrote off about £415 million in the coal industry. I had nothing to do one afternoon and it seemed to be a good idea that we should do it. I am not quarrelling with the Government's decision. My hon. Friend mentioned the relevance of getting the global target right; but what is it we are aiming at? In my day at the Ministry of Power we certainly thought in terms of an industry exceeding 40 million tons.

I know that at the moment steel industries throughout the world are depressed and it is wrong to talk so gloomily about the situation in the British steel industry as if it were something happening in isolation. If we delay a decision or, worse, announce a decision of a global figure influenced by temporary depression that would be a great tragedy. I must ask the Minister to say that the Government are not seeking to bring down the totals of steel production because of a temporary recession which is causing the industry, certainly the British Steel Corporation, to lose money on a scale which would not have been the case if the economic conditions of two or three years ago had persisted.

At the moment some of my constituents are receiving a New Year present from the Steel Corporation in the form of redundancy notices to take effect at the end of the month. While I welcome the £265 million of capital development for the industry, it is precious little consolation if I cannot be told that after the unanswered case we have made for the continuation of steel-making at Irlam there is to be no capital investment there. Now that we are faced with a redundancy figure of 1,900 people in a small area, it is time the corporation made a decision to continue steel making at Irlam. Phase 2, which would have cost another 2,400 jobs, has been abandoned. Unless it is said that the objective is to modernise the steel works at Irlam and bring in electric arc furnaces to replace the obsolete rubbish which is being got rid of, I cannot view the £265 million with any great glee.

Clause 2 casts doubt on whether the B.S.C. has been acting legally in closing the many branches of the industry which have been closed. Do the Government and the B.S.C. believe that a case taken before the courts based on the 1967 Act would show that they had no right to close down certain works which have been closed? I should like some further explanations on this from the Minister.

When the Labour Government took over the steel industry, I drew up a list of firms which would go into the public sector. Everyone knew that one reason for nationalisation was the large amount of obsolescent plant in those firms which private enterprise either could not or would not find the money to modernise. It was to modernise those plants and so to achieve the 40 million tons we aimed at that we took those firms into the nationalised sector. Is there now concern in the Government and the B.S.C. that, whereas the House of Commons took that decision on nationalisation so that those firms could be modernised, the B.S.C. in some instances, instead of modernising obsolescent equipment, is closing firms? The Government owe the House an explanation for the words in Clause 2(1):
"Nothing in sections 2 and 3 of the Iron and Steel Act 1967 … shall be construed as imposing on the Corporation any duty to carry on, or secure the carrying on by the Corporation and publicly-owned companies, of iron and steel activities …".
Why are we asked to do this? I can only think that there is legal doubt whether the corporation is acting correctly within the ambit of the 1967 Act in doing what it has done. Or is the explanation that if the corporation were allowed to take account of losses the Government could then say, "It is your own fault because you did not close down more of the older plants."?

I hope that we shall have an assurance that the global figure of £40 million is still the objective of the Government and the B.S.C. and that they do not see it as their duty to close down obsolescent works which we knew all about when the House of Commons decided to nationalise and which it is their duty to modernise rather than close down.

In the reconstruction of the capital of a great industry like this there is a twilight area. We are now seeing the onset of technological unemployment. Can the Government in 1971 calmly contemplate the situation where, in a comparatively small community based on one huge firm, that firm walks out of the economy and the whole community collapses'? The Government know full well that it would cost the taxpayer far more to try to reconstruct the economy of that area and to pay unemployment and other benefits than it would to provide temporarily the money necessary to keep the firm running until modernisation brings it to economic health. In Irlam this argument goes beyond the steel industry and can be applied to the coal industry. I humbly tried to get something going in this respect when I got the Cabinet to agree to the expenditure of £30 million.

At a time when technological unemployment is showing and the Chancellor of the Exchequer has failed in his fifth attempt to get the pump re-primed, the Government should look at what technological unemployment is about. When the Government say to the nationalised industries that they must behave in a thoroughly commercial way, those industries are entitled to say that it is no concern of the Government if they close down. On the other hand, can the Government afford to sit back and allow that to happen?

In the greater Manchester area, where, normally, redundant steel workers would get other employment, in the last 12 months unemployment has almost doubled and the tendency is still further in the same direction. The B.S.C. has said that it studied the social consequences of closures at Irlam. The social consequences having been studied, the decision was still taken, and the results are now so catastrophic that a person losing his job in Irlam is unlikely to get another job anywhere in the greater Manchester area.

It is now a matter of public accountability. It is no good either the Chancellor of the Exchequer or the Prime Minister saying how concerned the Government are about the terribly bad unemployment figures unless they are prepared to do something about them. Where we have a nationalised sector in which the capital structure can be adjusted and in which we can look at the consequences of closure, it is not good enough for the Government simply to say that nationalised industries must be run on a purely commercial basis if the result will be wide-scale devastation and unemployment.

I therefore ask for some adjustment in this twilight area between commercial viability and the catastrophic results of standing back and allowing closures. There must be an adjustment of Government policy to allow plants which could become viable with the injection of capital to remain open in the meantime by means of Government financial assistance to the British Steel Corporation.

5.30 p.m.

I should like to address my remarks particularly to the question of paying off the sum of £350 million. Such a large sum of money is not always understood by people at first glance, and it is better to bring it down to a level which can be understood by an ordinary person. This sum represents £7 for every person in the country. This worries me intensely, particularly when one compares the steel industry with other industries which do not receive subsidies in this form and simply go out of business. Those industries do not hit the headlines because they do not employ as many people as are employed in the steel industry.

In the textile industry and in engineering over the last five or ten years a number of companies have gone out of business, not because they have not been go-ahead firms—many of them have been forward-looking—but because they have faced a difficult time with cheap goods coming in from overseas, lack of investment, and the additional difficulty of obtaining investment from banks and other sources. They have simply gone out of business; they have not expected the Government to subsidise them. In this respect the steel industry is something of a spoilt child in the favouritism which is accorded to it. I fail to see why the steel industry should receive assistance by as much as £350 million when other industries have not had the same preferential treatment.

Obviously it is not appreciated just how hard competition is in the textile industry. Yet firms in Keighley, for example, have not asked to be subsidised; they neither expect nor want to be subsidised. But such firms are no less important to the industrial and commercial life of the country than the steel industry. I would not wish to be thought to be a Job's comforter, but I was interested to hear the Minister say that he hoped that the steel industry would move to profitability by 1973–74, subject to the normal uncertainties in the steel industry. This comment could apply to any industry in which there are always normal uncertainties. However, I am not happy that the steel industry will go into profitability. What will happen if it does not do so? Who will write off the loss?

I was interested that the Minister should say that the British Steel Corporation expected to keep this loss to a minimum. But everybody knows that if a bottomless purse is available there is not much incentive to keep things to a minimum. I should like to be assured that there will be some means of control to keep these losses to the minimum.

I end as I began. Although there are other industries in this country which have not been subsidised, and which do not wish to be subsidised, such industries have as difficult a time as the steel industry and face far greater competition. Therefore, I hope the Minister will clarify the situation about profit and loss and will give some of us a little more hope that we shall have a healthier steel industry.

5.35 p.m.

I wish at the outset of my remarks to point out to the hon. Lady the Member for Keighley (Miss Joan Hall) that if the British Steel Corporation had the same freedom as is enjoyed by the average private business I am sure we should not be discussing these matters today. But if the hon. Lady and her party insist on price restriction and vetting committees which delay capital investment for up to two years, she should know the problems which this creates.

I wish only to comment that the steel industry has not had to face the tremendous competition which has beset the textile industry in the face of the cheap goods with which it has had to compete.

The hon. Lady may be interested to know that yesterday I took a deputation of cutlery manufacturers, who are an offshoot of the steel industry in Sheffield, to see the Secretary of State for Trade and Industry on this very problem.

I wish to touch on three points. I wish, first to look at the financial situation of the British Steel Corporation; secondly, I wish to examine the borrowing powers of the corporation; and, thirdly, I should like to draw attention to the present situation in this country's city of steel—Sheffield. When we are told that the corporation expects a loss of £100 million this year and next year, we must look at some of the reasons for this situation since this might help to keep the matter in perspective.

The corporation in the last two years has continued to invest when it has been losing money. Even now it is investing hard-earned capital so that in years to come it can get some of the fruits of that investment. It has not followed the example of the private companies prior to nationalisation which did not invest at all, but it is just because the industry has invested its capital that it has fallen into the present situation.

There have been continuing restrictions on price increases by both Labour and Conservative Governments. The story has been the same ever since nationalisation. Price increases have been too small and too late to have any appreciable effect.

Another reason why the corporation faces a £100 million loss is that it is charged with a social responsibility as well as with the task of making a profit. During the last 12 to 18 months it has deliberately been maintaining old, unprofitable plant in existence because of the social consequences which it would have to face if it made a normal straightforward commercial decision. I believe we as politicians must make up our minds whether a nationalised industry is to be charged to make a profit and whether the Government should take over the social responsibility; or we must decide whether the Government are showing due regard for the social consequences of their actions when profitability will suffer accordingly.

I have already mentioned what happened to investment before the industry was nationalised; and we all know of what happened when the Government interfered in the steel industry when part of a major complex went to Ravenscraig and the other half to Llanwern. If those two units had been combined, it would have been the most modern plant in the country.

Another factor which has contributed to the £100 million loss is that the corporation, like the industry at large, has passed through possibly the worst economic climate for many years. Finally, there is the continually increasing threat of Japanese competition. The Japanese do not have to face up to the social consequences which we face, are able to put their plant exactly where they want it, and are able to move workers to any location in conditions which would not be tolerated in this country.

I am intrigued by why everybody is so optimistic about 1973–74. We shall lose £100 million next year. We shall lose a further £100 million next year. Even if the accumulated losses to the beginning of 1973 are wiped out, the fact remains that there has to be a sufficient turn-round in trade for the corporation to earn at least £100 million more in 1973–74 before it moves into profitability. I should like to know what are the contributory factors. What will bring about this substantial change in the economic climate? Will inflation halt altogether? Will the Government release the corporation from interference in its proposals for price increases? Will there be a contraction of capital investment so that, instead of the corporation reinvesting in a brown field or a green field site, the money will appear as profit? Why are we so optimistic that life will get better from 1973 onwards?

We are told that it may be that we shall go into the Common Market. The hon. Lady made a valid point in that connection. At the moment, the joint steering group scrutinises everything that goes on in the corporation. It tells it how it may spend every penny. If we go into the Common Market, will there be someone in Brussels telling the corporation where it can or cannot expand?

I want now to say a few words about Sheffield. In a general debate of this kind, normally I do not address remarks towards the city of Sheffeld, part of which I represent. However, there have been certain developments there in recent months which are worth relating. Right hon. and hon. Members opposite often refer to profitability. The Special Steels Division, which is centred in the main in the Sheffield-Rotherham area, has shown a consistent trend of profitability. The last financial statement of the corporation on a full year's activity shows that if it had not been for special steels the corporation really would have been in the doldrums. On the basis that it is important to preserve, maintain and improve the main source of profit, there has been a sad lack of capital investment in special steels in the Sheffield-Rotherham area in the last two or three years. Compared with the money spent or scheduled to be spent at Ravenscraig, Llanwern or Ebbw Vale, the money which has been spent in the Sheffield-Rotherham area has been a mere pittance. But this is the area and these are the products providing the small amount of cream which the corporation has.

I hope that a substantial part of the money allocated for borrowing purposes will be used to strengthen the position of the Special Steels Division in the Sheffield-Rotherham area. However much is spent on bulk steel making, the profit margin in the face of Japanese and European competition will always be relatively small. If we put substantial sums of money and expansion into special steels, I believe that they will always be the mainstay of the corporation.

We have heard mention on previous occasions of the River Don works. The really black cloud hanging over that works has lightened somewhat. But the people of Sheffield still want to know how much capital investment is to go into the works. People in Stocksbridge and Rotherham want to know how much > money will be invested there and what their future is likely to be.

The point has been made already that we have not yet had the report of the joint steering group. I believe that this is deliberate policy. The Bill has been brought forward just to take care of the position until 1974–75. It is clear from all the indications that we have had to date that the only expansion envisaged by the Government for the corporation up to 1975 is a possible extension of the Heritage schemes. Those schemes have now been started. But there is no mention of a brown field site or a green field site. We are told that these matters will be dealt with in the report of the joint steering group. However, I am prepared to look into the minds of the Government and predict what will be in that report. I am prepared to guess what the Minister will say in April. It has a hearing on this Bill and on the borrowing powers and finances of the corporation.

I believe that the Government's conclusion will be that the expected capacity and sales of the corporation in 1980 have been over-optimistic and that they do not see the necessity for both a brown field and a green field site. I believe that the Government will tell us next spring that we shall not see a green field site up to 1985, although there may possibly be a brown field site before 1980.

On the basis of optimism that we shall get a brown field site, I have been putting my steel experience to good use and looking round the country to see where it should be in order to give the maximum return on the capital invested by the corporation. I have plumped for a site at Redcar. There is a deep-water terminal, and the infrastructure, the schools, the houses and the skilled manpower are there. It is an area which has been clobbered out of all recognition by redundancies in the steel industry in the last few years. Certainly I suggest that an early decision should be made that the brown field site should be at Redcar.

I now wish to put one or two points to the Minister about the enlightenment that he gave us on the 1967 Act. The hon. Gentleman has confirmed that it gives unlimited authority to the corporation to sell off any part of its assets that it finds unprofitable or any part of its assets of which it wishes to rid itself for other reasons. It also removes the corporation's obligation to maintain a supply of every kind of iron and steel product if it does not want to produce it. Will the hon. Gentleman take that a stage further and confirm that the consumers of products which the corporation may stop producing will be entirely in the hands of foreign producers? That is all very well when demand is low, as it is possible to buy job lots at fairly low prices. But do the Government realise that when there is a boom in the steel industry, in effect, more than normal prices have to be paid for such products? Do they also realise that this again will bring about an abdication of the Government's responsibility to provide jobs for our work people? Every time this country goes out of any area of activity, we give our European competitors a stronger hold on the consumers of those products, and we put British steel men out of work.

I have one final point. I find that any discussion of green field and brown field sites always leads to a great deal of woolly idealism. Even with brand new large-scale plants in ideal geographical situations, unless there is a fantastic increase in demand it is logical that it is possible to keep those modern high-cost plants in production only by closing unprofitable plants. To those who say that we must have green field sites and brown field sites, I suggest that we must also recognise that places like Consett, Corby, Shelton and Irlam may cease to be steel-making centres. We cannot have it both ways. If we have brand new, expensive, high capacity, low cost steel making, say, 15 million ingot tons per annum, a lot of these places which we define as integrated steel plants will simply become finishing mills.

I look forward to the statement by the Minister in the spring about the proposals and findings of the steering group, but I am afraid that my forecast will prove correct. I believe that the Government are deliberately restricting the expansion of the British Steel Corporation and are probably preparing it for an arduous existence in the Common Market.

5.50 p.m.

I listened with great interest to the closing remarks of the hon. Member for Sheffield, Brightside (Mr. Eddie Griffiths). In fact, I listened to him most closely throughout his speech, but I thought that in his closing remarks he made a positive contribution to the thinking that is necessary as we consider the whole pattern of British industry, in particular nationalised industry.

The hon. Gentleman spoke with great authority on the steel industry. He was brave enough to suggest that we had to make economic decisions in industry and that, in so doing, we faced grave social consequences. Not everyone in this House is so brave. There is a confusion which inevitably descends upon politicians as all kinds of social as well as economic pressures are put upon them.

While appreciating much that has been said, I think that in the presence of my hon. Friend the Member for Sheffield, Brightside (Mr. Eddie Griffiths) we should say that although he talked about what might happen in other areas, when he talked about his own area he spoke of the need for considerable expansion.

I accept that. I do not deny that we shall undoubtedly see Sheffield remaining on the map as a major steel industry city in the world.

I was calling for greater capital investment in Sheffield, because it is profitable and would put the corporation in a much better position than it would be if it were not for the special steels.

I understand. Perhaps I should return to my general remarks having followed the hon. Gentleman to a certain extent in some of his previous observations.

The hon. Member for Ebbw Vale (Mr. Michael Foot) cast doubt on whether we know how to run and manage nationalised industries. I am sorry that he is not in his place because I should have liked to direct some of my remarks to him particularly.

There is still considerable confusion in our minds about the administration and management of the nationalised industries from this House. For many years I have served on the Select Committee on Nationalised Industries. A recommendation made to Parliament by that Committee some years ago was very clear about separating the economic requirements of the nationalised industries from the necessary social obligations when such decisions are made. The Committee's report made it clear that the nationalised industries could not succeed unless, to use the words of the right hon. Member for Newton (Mr. Frederick Lee), we took out the twilight area and stopped the fudging between an economic advantage or reason and a social obligation.

Unfortunately for too long uncertainty has been hanging over the steel industry. As we go forward with this valuable Bill, I believe that there will continue to be some uncertainty in the industry, not any longer because of insufficient investment—the Bill makes good that deficiency—but because it is still not clear what the position of the Secretary of State and the Department of Trade and Industry will be in relation to the board and management of the British Steel Corporation. I should like these definitions of the relations between this House and the boards of nationalised industries to be clearer.

My hon. Friend the Minister for Industry said that in a few years the British Steel Corporation will perform in a normal commercial manner. But the hon. Member for Ebbw Vale said that decisions by the British Steel Corporation must be subject to the wishes of this House. I suggest that neither is completely right. I can understand the hon. Member for Ebbw Vale saying that this House must have a say in the determinations and decisions of nationalised industries. They are nationalised so that Parliament shall have a say.

The right hon. Member for Newton is personally involved in his constituency about the decline of an old part of the steel industry. He must be under great pressure. He speaks with great sincerity in many debates expressing the views of his out-of-work and potentiolly out-of-work constituents. We should listen to him with respect and take account of what he says. Equally, the Ministers responsible must take account of what hon. Members say at any time, not for economic reasons, but for constituency and social reasons and true representa- tion of the people's problems in this place. The responsibility lies on the Minister's shoulders to take those representations properly into account.

We cannot expect to see the re-emergence of a great steel industry in this country if we put too much of the social responsibility on to the British Steel Corporation. This is not to say that that board, headed by its chairman, should never consider the social effects of any decision, however big or small. Every employer, whether private or public, will always have such a responsibility. Every employer makes an impact on society by his decisions. When an employer makes an impact on society, he must take into account what the result of that impact will be.

When such major industries as our nationalised industries cause a complete social and economic change in an area by their decisions, the dichotomy, the argument which goes on, is wrong for future economic success. We should relieve the British Steel Corporation, as we should relieve the corporations of the other great nationalised industries, of having to take too much account of these social obligations. They should know and recognise them but they should not be deflected from their strategic course, which is to achieve success, viability, profitability and expansion.

My hon. Friend the Member for New Forest (Mr. Patrick McNair-Wilson) made this point too when he asked the Minister to establish clear financial objectives and to give them to the chairman and his board and to say, in effect: "Can you do it? Are you prepared to take on this challenge? If so, you can have the job. We will see how you get on, and we will support you. From time to time we may have to come in and say that for social reasons we do not like your decisions, but do not be deflected. We recognise that you are following a proper strategic course. We shall take care of the problems. That is our duty. That is our responsibility. It is our responsibility to spend taxpayers' money in this way."

I should like this Parliament and this Government to get clear the way in which we should run our nationalised industries. I am not one of those who think first and foremost about denationalising our nationalised industries. I think first and foremost about making them a success, and we are now making some of them a success. The air corporations compete around the world and they are not unsuccessful. The British Airports Authority is not unsuccessful. I could list others. Perhaps we shall one day see British Railways competing effectively as they link up on the Continent and modernise themselves still more. However, I do not today want to debate other industries as the subject before us is the iron and steel industry.

The Bill gives the corporation and the industry generally a fresh start. It puts the corporation on a proper financial footing. I should like to see real economic objectives put before the House and the corporation, objectives which can be seen by hon. Members and by the public. I want not only to give a fresh start to the corporation, to its board, to its managers and to all those who work so well in the industry, but I want them to know that they are being given a fresh chance and a fresh challenge, because only in that way will they meet the challenge.

Above all I want the public to know that we have faith in this industry as we vote today to give it greater investment powers and to write off debts. That is the fresh start. We must not let the debate go by and the Bill go through to become an Act without letting people in the industry, and those outside it too, know that this a fresh start and that the industry is being put on its feet and being given a chance to compete. It should be made clear that we are not going to bow our heads and admit that we are frightened of competition from the Japanese, the French, the Belgians, the Dutch or the Germans. This is the turning point for the British steel industry. We must ensure that we give the industry the enthusiasm which I am trying to express and that we tell the public about it as well.

I am a little concerned at the continuing intention, as expressed in the Bill, of the Minister to intervene in and interfere with the commercial operations of a nationalised industry, though I realise that is being done because we in the House of Commons are allowing the industry to write off debts and to set up a reserve fund. The steel industry is to have reserves, which every industry should have. The industry's house is being put in order, and I appreciate that, as with all other nationalised industries, the Minister wants to have a say in how its funds shall be administered.

Only yesterday I was inquiring in a Standing Committee about why the Minister concerned should have a say in telling the I.T.A. how to run its affairs. I happen not to like this sort of intervention. It is the kind of intervention that we have always had but it is my view that it should be brought to an end.

I was not one of those who welcomed the Secretary of State's intervention on the issue of price reductions. The intervention was a move in the wrong direction. I understand and accept my right hon. Friend's reasons for what he did and they have been explained to the House. The industry was not quite in order. Its affairs were not in proper shape. Its forward estimates were wrong. It was expanding, or proposing to expand, and at the same time carry a great loss. Some re-examination was necessary. Nevertheless, I do not welcome intervention. I do not like to see a Minister automatically assuming power to control the industry's reserves.

I conclude by reiterating what I said at the outset. It is no solution to our problems to push the corporation into perpetuating incorrect economic and industrial plans or programmes. If great social reasons made us push it that way, we should relieve the industry of having to move in the wrong direction because of having to consider with too great weight the wrong factors. As I said earlier, that is where the Government must come in. They must come in to safeguard the community against the consequences of correct economic decisions.

I believe that with the Bill we have a chance to move in that direction and to create a case example of how we should administer our other nationalised industries. We have a chance to make a fresh start. I hope that the Government will now begin to think about the overall problems of administering our nationalised industries across the board. We cannot go on as we are. We have to give our nationalised industries a fresh start. We have to give them the chance to succeed. I believe that that will be done only by having less interference and by the boards being made more responsible to the people they serve—the public, industry and the community at large.

Royal Assent

I have to notify the House, in accordance with the Royal Assent Act, 1967, that the Queen has signified Her Royal Assent to the following Acts:

  • 1. Consolidated Fund (No. 3) Act 1971.
  • 2. Banking and Financial Dealings Act 1971.
  • 3. New Towns Act 1971.
  • 4. Baird Trust Order Confirmation Act 1971.
  • 5. Glasgow Corporation Order Confirmation Act 1971.
  • Iron And Steel Bill

    Question again proposed.

    6.8 p.m.

    The hon. Member for Canterbury (Mr. Crouch) has made a considered speech and one that will be worthy of serious re-examination. I am with the hon. Gentleman in seeking to make the nationalised industries pay their way fully and have an honoured and effective place in our industrial and economic scene today and for the decades ahead.

    I believe that the British Steel Corporation has made a distinctive contribution to the steel industry and to the economy generally, and in very difficult times at that. It has had to put up with price controls and with the worst-ever inflation in costs. I believe that to a degree at least it has suffered from under-investment. All hon. Members are aware of the recession in steel consumption and of the growing commercial opposition abroad. I think that the corporation has been faced with added difficulties in that for a period of time the Government have been unable to announce their long-term plans. It is to the credit of the corporation that it has been able to revise its organisation and planning and that during the last year it has been able to extract from the Exchequer large sums of money for the development of the industry.

    The corporation carried out some of the biggest mergers ever in the industrial life of Britain. It has set up new cost controls. Since 1967 management-union relations have improved steadily. I pay tribute here to the major unions in the industry—the B.I.S.A.K.T.A., the A.E.F., the Transport and General Workers' Union and the blast furnace men, with whom I worked for a brief period in the steelworks in my constituency and of whose union I was a member. But it is a fact that the corporation is not something in which I take great pleasure yet. I know that it has made an attempt at improving efficiency and profitability, that some 61 works have been phased out, that last year there was a slimming in manpower of 20,000 men and that in cost reductions this year already the corporation has saved more than £30 million. It is fair to state all this to the credit of the corporation because it suffers criticism from time to time.

    The Bill is of enormous importance. I have selected a reasonably localised example of how increased efficiency and profitability could come to the corporation. This is by examining the large steelworks in my constituency employing 13,000 men, the majority of whom are my constituents. I want to see this great steelworks moving further into the black and becoming even more efficient. I should report that it has had new coke ovens recently, that its blast furnaces have been relined and that there is being built a huge tandem mill, potentially the most effective and modern in Europe. That is on the credit side of Shotton. I hope to see Shotton contribute to the increased profitability of the corporation but I must point out the dilemma facing it. There are 12 open-hearth furnaces which are now nearing the end of their efficient life. By the mid-1970s they will need to be drastically altered, which I feel could not occur, or to be replaced.

    Immediately there springs to mind the question of the replacement of these furnaces by two B.O.S. furnaces or three L.D. furnaces. That could ensure for Shotton continuation in the making of steel. There is little point in having a steelworks that in effect does not use its own metal. Three thousands jobs are directly involved in the coke ovens, blast furnaces and furnaces for making the metal.

    The Bill seems to presage—I do not criticise it—large-scale investment in other parts of the country. The temptation may be to have a number of very large steelworks. One may deduce that steel-making capacity at a plant like Shootton need no longer continue. There is concern in four towns in my constituency, Connah's Quay, Bagillt, Flint and Shotton. No mention is made—perhaps it is impossible—in the Bill of speculation about development of Birkenhead Docks. We would like to hear more from the Government about this development which would make the docks capable of taking ore carriers, transferring ore from Birkenhead to the site just 10 miles away. Such a development could secure a reasonable future for our steelworks. So far, however, we have had no indication of what is to happen at Birkenhead.

    It is fair for me to be brief and not labour the issue too long in the localised way I have adopted so far, and I will do no more than show how I see the central dilemma facing the corporation and the Government—the question of enormous modernisation and consequently, in certain parts of the country, the possibility of steel plants being run down, even phased out, in time. In my constituency there is realisation that rationalisation could conceivably mean redundancy and unemployment for certain parts of the country.

    My hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) mentioned green field sites and the Common Market and how our entry into the E.E.C. could conceivably affect the long-term investment plans and the location of our steel-making capacity. I spoke in the Common Market debate and felt that I had to be cautious and come out against entry because I could not see how the Scottish and Welsh steel industries in the long term could be well served by our joining. We have heard the opposite case from the Government and it is a matter of contention and debate. I accept the integrity of statements by hon. Members from both sides of the House on this issue. In Shotton, we hoped that we would be considered for a green field site but the indications are that the pos- sibility of such a development in Shotton is receding rapidly.

    I join with those who throw their weight behind the need for an immediate, or at any rate a speedy, announcement concerning the long-term investment policy of the corporation. Until a decision by the Government is made it will be very difficult to comfort and satisfy the reasonable complaints and worries of steel-making communities all over Britain, particularly in Shotton.

    6.16 p.m.

    The House will have heard with interest the views of the hon. Member for Flint, East (Mr. Barry Jones) on why he thinks the steel industry in Wales and Scotland would be disadvantaged by British membership of the E.E.C. The interest of the House will now be fixed on what the hon. Member for Motherwell (Mr. Lawson) has to say, if he is fortunate enough to catch your eye, Mr. Speaker, as he is a well-known last ditch Eurofanatic. It would liven our proceedings if the debate about membership carried on by the Labour Party so assiduously upstairs could occasionally be played out on the Floor of the House.

    My first and immediate thought on this debate was what a genteel way it is proceeding. Indeed, it has the essential dolefulness of an annual general meeting of shareholders who have been called together to hear something about the capital restructuring of their company. But ordinarily in private commercial life, of course, the directors would be obliged to give a proper account of their stewardship. We had the hon. Member for Ebbw Vale (Mr. Michael Foot) doing his best to take on the rôle of the angry shareholder, but he is not the radical he was. When he came to the possibility of actually being confronted at long last by real steel barons he flinched away from any criticism of the corporation. That is a sad demise of the radical professions which we ordinarily associate with the hon. Member for Ebbw Vale.

    There is much to be said for the House getting away from the stereotyped steel debate in which the Opposition attack the Government, the Government's supporters attack the British Steel Corporation and the Government maintain a benevolent and neutral silence. We have endeavoured to get away from that today. We are indebted to a number of hon. Members on both sides who have sought to mitigate the stereotypes of party controversy about the industry. I am thinking particularly of the hon. Member for Sheffield, Brightside (Mr. Eddie Griffiths), who very fairly said that we would have to consider whether the choice of a green field site did not imply further contractions in other directions in the industry which would have constituency consequences—consequences which were underlined by the right hon. Member for Newton (Mr. Frederick Lee) and by the hon. Member for Flint, East.

    One cannot but feel sorry for a steel corporation and its management which are constantly upbraided for, on the one hand, not pursuing the conventional activities of profit-seeking business and, on the other hand, for not pursuing policies concerning both the nature of the plant and its location which are deemed to be consistent with each hon. Member's constituency interest.

    We are none the less obliged to ask ourselves, and to ask the Minister, whether he is happy with the present management of the corporation. I make this point in no personal sense. I am talking about the management structure and whether we are seeing in the Bill the fruits of the activities of an organisation which is not most suitably equipped to deal with the commercial situation in which it has to operate. I ask this as a neutral question. I do not seek to pose the answer. However, on an occasion when the shareholders are called together to write off capital sums of this amount that is the most obvious question to ask, not least because in the debate on the Iron and Steel Bill in 1969 my right hon. Friend the Member for Leeds, North-East (Sir K. Joseph), when leading from the Opposition Front Bench, said this:
    "We have the gravest distrust of product grouping. It gives us the impression that, instead of having one centralised monolithic monopoly handling all steel products except those in the private sector, we are going to have perhaps four monolithic monopolies, each responsible for one product group".—[OFFICIAL REPORT, 8th May, 1969 Vol. 783, c. 696]
    That is dominating evidence of the concern of my right hon. and hon. Friends about the very pattern of management structure which has been adopted by the corporation. All that I am asking—at the very least we deserve an answer to this—is whether the Government are now satisfied that the present management structure of the corporation is the most suitable.

    There is the question of the totality of the activities of the corporation. I understood that the corporation was to be encouraged to move into partnership with private capital and to limit its activities in certain directions, to divest itself of some responsibilities. One must remember that companies in the private sector which are confronted with situations of fairly small reorganisation are often associated with ceasing to operate the whole scale of activities in which they have hitherto engaged. I am thinking particularly of B.S.A.

    What is the progress report on the policy of divestment or hiving off, or whatever ugly phrase one cares to use to describe it?

    That takes me to the second consideration which very properly has concerned both sides, namely, that it would be foolish not to realise that Government intervention in the pricing policies of the corporation is in part, though we know not to what extent, responsible for the corporation's present financial situation. I accept the judgment on this point expressed by my hon. Friend the Member for Canterbury (Mr. Crouch).

    None the less, it would be useful to have it on the record that there were a number of people who doubted the corporation's wisdom in applying for the 15 per cent. increases at the very beginning of this year, because in the judgment of those people the market was unlikely to bear increases of that nature. The realities of commercial life seem to have borne out these people rather than the corporation. There must be continuing and, I suggest, growing unease that the policy of direct price intervention in the public sector will create more problems than it will provide solutions.

    What I found particularly unnerving about the remarks of my hon. Friend the Minister for Industry was the indication that the price control on the corporation seemed to be extending beyond the limit which has been covered by the Confederation of British Industry's period of voluntary restraint. Are we moving into a situation where there will be fairly rigorous price controls on the activities of the corporation throughout 1972? If so, one of the consequences will be to depress the trading circumstances of the private sector.

    I reassure hon. Members opposite. I shall not lapse into a traditional theological argument on the merits as between the private and the public sector. I say only that I happen to believe that on both sides of the House there is very real concern about current levels of unemployment. There is also a belief that those levels can be mitigated, in part at any rate, by an upturn in investment. Therefore, there will be general anxiety to see the billet plant which the private sector wishes to undertake proceeded with as quickly as possible. I believe that the finance for the billet plant is in itself determined, at least in part, by the ability of the private sector to have relatively flexible and free pricing arrangements.

    This goes a little further. It takes us into the central point of consideration—namely, just what will be the relationship of the Bill and our intending membership of the Community? Those who argue in favour of Community membership say that, if only the industry can be brought within the wider framework of the Treaty of Paris, there will he restored to the industry a commercial freedom which in reality it does not now possess and that, therefore, it will enter into a more competitive, but none the less a probably much more satisfactory, trading arrangement.

    If that be true, in every other aspect of our national life we have talked about transitional arrangements. It would be a real irony if the British steel industry were to be subject to the cloying hand of intimate Government concern in its economic behaviour in a position exactly the reverse of what it is supposed that industry will experience once it begins to operate under the Treaty of Paris. This goes not only for the public sector but also for the private sector.

    I therefore hope that the whole policy on the relationship between the Government and the steelmakers, whether they are public or private, will be one which will quite deliberately seek to relax control so that the industry can proceed in circumstances much more similar to those which it will expect to find within the European Coal and Steel Community. If we maintain tight control up to almost 1st January, 1973, to switch from one situation to the other would court unnecessary difficulties.

    The very prospect of Community membership must touch upon issue after issue which has been raised in the speeches made this afternoon. First, there is the whole question of the green field site. There has been great and fluent advocacy on this point, first about whether it is desirable and, second, about its location. No one who heard my hon. Friend the Member for Middlesbrough, West (Mr. Sutcliffe), reinforced as he was so cogently by the hon. Member for Brightside, can doubt that there was a very strong argument for the Redcar site. But we should be naїve in the extreme if we did not take into account the existence of large bulk steel construction at places like Marseilles, Dunkirk or Ijmuiden. So we must ask whether this is a decision which will remain within the context of this Government——

    Will not this be a Community decision? Will not the Community have some influence here and, indeed, take into account whether a green field site is necessary at all?

    I am sure that all of us who have argued the desirability of a green field site will be interested to know that in the judgment of my lion. Friend this decision will belong to the Community. He may be right but it would be more helpful to the House if the Minister or the hon. Member for Motherwell answered that question than if I did. It is an answer to which we will look forward.

    Let us take it one stage further, to another area where a good deal of interest has been expressed about the corporation's plans. I refer to the River Don works. The plans for the open dye forge and the 200-ton casting foundry are very ambitious. Some might say that in the context of world supply and demand it might be a little hard to make a case. I do not know: I am not here to answer my own question—[Laughter.] That is what we pay the Minister for. But there can be no doubt that the major customers for forgings and castings of those dimensions are the public sector authorities such as the Central Electricity Generating Board.

    We know that the Community has rules prohibiting preference in public purchasing for the products of the individual nation State, so it is very important that we understand exactly what will be the relationship between the C.E.G.B. and other potential national State purchasing agencies within the rules and framework of the Community. And we must know now, so that we can make our own appreciation of what investment policies are being pursued.

    Let us make no mistake about it: the decision one way or another affects jobs not just in Sheffield but in other parts of the country. If we end up with surplus capacity, we might fractionally increase employment in Sheffield but it will be at the expense of employment in other areas, particularly the West Midlands.

    Is the hon. Gentleman saying that the motto which we sometimes use in hard times, about buying British, will no longer be permitted in the E.E.C.?

    We are all well aware of the Community regulations which state that a "Buy British" policy would have to be forsworn by our public sector purchasing agents. I make no more comment than that. It is not for me to say whether or not Community rules are observed in spirit in the real world. These are exactly the questions which must be thrashed out now and not left to emerge after we enter the Community.

    There is a well-documented and well-founded record of cynical disregard by my hon. Friends for the whole concept of public dividend capital. No one has a better documented record of cynical disregard than my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley). I would like, since so much has been said about my hon. Friend's speeches but no one has yet regaled the House with one, to read a quotation from him:
    "I want almost to confine myself to objecting to public dividend capital. The intention is to pass the dividend this coming year, prob- ably next year and perhaps even the year after that." —[OFFICIAL REPORT, 8th May, 1969; Vol. 783, c. 746.]
    No forecast could have been more accurate and no one deserves the applause even of this thinly attended House more than my hon. Friend for his perception.

    Why then are we maintaining this happy fiction of the public dividend capital? It must be because we believe that it will give some manoeuvre within the prospects of Community membership which perhaps we would not otherwise possess. I suspect that the National Coal Board will want something very similar—again with an eye to Community membership.

    On these things, as on so many more, whatever our views of membership of the Community, it is clear that it would be to the advantage of the House if we knew a great deal more about how the Bill fits into the broader future foreseen for this industry. My hon. Friends can congratulate themselves that a Bill which in some senses is inherently very controversial has been so quietly and soberly received. But I should like to think that that did not mean that we were not looking, in our interest or our determination, to know much more about the relationship of the nationalised industries with other public authorities. I hope that perhaps one consequence of this debate and this emerging situation is that the Select Committee on Nationalised Industries will shortly turn a searching eye once again on the steel industry.

    6.37 p.m.

    The hon. Member for Oswestry (Mr. Biffen) tempts me to enter an argument about the E.E.C. and about how a Scottish Member representing a substantial part of the steel industry sees its benefits for his locality. I would also be tempted to enter into a long argument about the hon. Gentleman's last-ditch free enterprise approach. He is not a simple free enterpriser like his hon. Friend the Member for Keighley (Miss Joan Hall), but I should like to hear him discussing this question with his hon. Friend the Member for Canterbury (Mr. Crouch). If the arguments of both hon. Gentlemen were pushed sufficiently far, they might find that they agreed, although they seemed to be so much at variance.

    The hon. Member for Canterbury argued that we must give an industry like the steel industry its head, and give scope to the people who run it, that we should recognise the demand in our society for the increasing acceptance of responsibility. He said, however, that one cannot ctxpect the steel industry—I believe that he would apply this to any industry, even the textile industry—to accept all the responsibility that society now demands. Society must accept responsibility, and I agreed with the hon. Member for Canterbury when he told the Minister that he had a major responsibility in this matter.

    If the hon. Member for Oswestry is as intelligent as I think he is, he is bound to reach the conclusion that, while industry can be as enterprising and competitive as possible, there is a movement throughout the world away from the idea that any industry can do as it pleases. It must function within society.

    This is recognised today even in the so-called backward countries. Responsibility must be accepted all along the line, and we are bound to consider how much freedom industry can have, who must bear certain responsibilities and the need for social factors to be taken into account.

    The hon. Member for Bedford (Mr. Skeet) and I have been spending our mornings in Committee upstairs discussing the Mineral Exploration Bill. It is clear that society is demanding that mineral operators should not be given power to do as they please. The hon. Member for Oswestry is, I think, gradually realising this. The 19th century freedom of the purse is nearly at an end. It is becoming unsocial for employers to have the power simply to say, "I gave you your job and that is where my responsibility ends. If I decide to close down, that is too bad." That sort of freedom will not be tolerated, and, with the insistence on a different set of values, the steel industry must be considered in that context.

    For a century or more the British steel industry has been developing and growling in a haphazard way. Sections of it have sprung up in different parts of the country, responding to, for example, the availability of coking coal here and there and the needs of mills that have been established in various areas. We have the most widely scattered steel industry in the world. Upon nationalisation we said "Let us make it efficient" and we appreciated that that would entail rationalisation and closures.

    As my hon. Friend the Member for Sheffield, Brightside (Mr. Eddie Griffiths) said, we must exercise a sense of social responsibility to see that the people affected by rationalisation procedures are properly looked after. I am not demanding that the British Steel Corporation must bear the whole of this responsibility, although it has a great rôle to play. Society as a whole must see that when unpalatable steps involving workers have to be taken, they are not taken in times of acute unemployment. Equally, industry must not take advantage of heavy unemployment to speed the process of rationalisation. Whenever a major decision must be taken, all concerned must be called in to examine the implications.

    The Minister says that we must talk in terms of phasing out older parts of the industry. We must also talk about phasing in alternative means of employment to meet the legitimate social demands of the areas affected. As my right hon. Friend the Member for Newton (Mr. Frederick Lee) has explained, an area like Irlam can be rendered almost desolate by the process of phasing out. Special phasing in measures must be taken to ensure that something new takes the place of something that can no longer be sustained. When steel workers are made redundant, they must be given training for new jobs, and if those new jobs do not give them the same rates of pay, they must be given compensation.

    There is nothing novel in this argument. Indeed, the E.E.C. has played a substantial part in this process and has found ways of helping men to be retrained when a coal or steel industry has declined, and it has recommended payments to make up any reduced salary. The very activities of the E.E.C., previously the higher authority, have induced many member Governments to have adequate regional development policies. Although I might be termed a last ditcher, I am ready to defend my beliefs because I think this move will benefit the people I represent.

    We in Britain have a lot to offer compared with any other country in Western Europe. I hope that the hon. Member for Oswestry is not claiming that the English, Welsh, Scots and Irish are not as good man for man as the Germans, French and Dutch. We are just as capable of developing and using the same skills.

    In my view, the United Kingdom is well located in Europe. We are not on the periphery in a way that will place us at a heavy disadvantage in the E.E.C. We stand astride the North Sea on the Atlantic Ocean. One need only study the map to see how well placed we are, including the narrow waist belt of Scotland, with the Forth to the East and the Clyde to the West. We are ideally suited to export, remembering that there will be no great expansion of the British steel industry if we think only in terms of the home market. We must be confident. We are as good as the Japanese or Americans, and in Europe we shall have no heavy geographical disadvantage under which to labour.

    We are sited in such a way that industry can quickly reach the Atlantic. We have some of the deepest water, coming virtually right up to the shore. We can take 500,000 tonners. I do not know what Redcar's maximum will be, but it is clear that deep water is vital. Probably we shall not reach 500,000 tons for a ship. But certainly we could reach 250,000 tons. There is nowhere where such ships can be taken so handily; no tides, good shelter, deep water virtually up to the shore, and adjacent to an industrial area. The hon. Member for Oswestry provoked me into speaking of that matter.

    When our industry was at its freest, it was not doing very well. What we are suffering now was caused by our industry being so rapidly overtaken by the industries of virtually all other advanced countries. Let us consider crude steel, taking 1960 as the norm of 100 and 1969 as the figure with which we are concerned—this is not quite up to date but the picture is quite clear enough. The British increase in crude steel production was just under 9 per cent. The Japanese increased theirs by nearly 400 per cent. Every other country far outpaced Britain.

    This was partly because of the threat of nationalisation. Even admitting the threat of nationalisation, we had an industry in bits and pieces and on its knees. This was one of the principal arguments for bringing it under public control. We did not expect to make it a heaven on earth for those who worked in it.

    Let us take perhaps a better example, that part of the steel industry that was mostly free enterprise and still is to a large extent, the stainless steel and special steel sides. Taking the same years as a measure, the British increase in output was 6 per cent.; the Japanese increase was 422 per cent. The next lowest that I can find was an increase of 84 per cent. for West Germany. In those years we were rapidly overtaken by country after country. If the joint steering group is looking into the future and wondering what the size of the industry should be, if it comes to the conclusion that the industry need continue at only about the same size as it is today with a 25 million to 30 million tons capacity, it will have deliberately decided that we shall be not even a third or fourth rate industrial country.

    All the other countries are going ahead. In opening the debate the Minister spoke about the Japanese perhaps changing their minds about the 160 million tons of steel capacity that they had previously been aiming at. Perhaps they are changing their minds about 160 million tons. But we are changing our minds about 30 million tons. Consider the difference. They have reached a tremendously high level; we are down in the depths.

    If Britain is to be comparable even with Germany—I should not say "even with Germany"; Germany is obviously a competent country, and we would not wish to be behind Germany—we must certainly push our capacity beyond 40 million tons, for by the time we reach that, Germany will be far ahead. That is the minimum target at which to aim.

    On that basis, with many of those problems, there was bound to be a rationalistion. It may be that in some areas we were rationalised out of existence. It is clearly a Government responsibility—in this I support my right hon. Friend the Member for Newton—not only to say that we have a regional development policy and that we hope that industry will come, but also to take deliberate and systematic steps to create in these areas, under inducements offered to industry if it will not come in on its own, industries of a sort which will enable us to mop up problems that have been brought into existence in those areas. That is essential.

    I plead with the Government—I might even say I plead with my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot)—when I say that we cannot continue to think of nationalised industries in the old terms. We must appreciate that this is one way of organising the production of goods, services and so on.

    The nationalising of an industry is not a social revolution and does not mean that a socialist society is being brought into existence. We could nationalise every industry and be very far from what I consider to be a socialist society. We could strip the country of any kind of private ownership and still be further away from a socialist society than when we began the operation. A socialist society entails increasing participation by the people involved, free people, who maximise their democracy and perfect it. In the process of doing that, we must find ways of handling our industries, particularly the big ones such as steel, which give them scope and freedom at the same time, the industries have to recognise that they are operating in a society and have social responsibilities which have to be carried.

    We can quibble about the details of the Bill, but I welcome it as assisting the steel industry to alleviate some of the great difficulties which confront it. We are all waiting very anxiously for the decision on its future size. I add my plea that if we come out for anything less than 40 million tons capacity we shall have decided, as from now, that we shall be a fourth or fifth rate nation in Europe.

    6.57 p.m.

    I always find it a considerable pleasure to follow the hon. Member for Motherwell (Mr. Lawson) because we have had the reverse situation in Committee on the Mineral Exploration, Etc. Bill. He did not observe that one of the reasons why steel had to be taken into public ownership was that it was only under aegis that there would be a vast expansion in production. That is not what happened.

    The 1966 crude steel figure for the United Kingdom was 24·7 million tons. Taking the 1969 figure, which is a fair comparison, it had risen to 26·8 million tons, which is a very small increase. As my hon. Friend the Minister for Industry indicated earlier, the investment in the industry was much greater prior to nationalisation and it fell away very seriously when the Labour Government took over in 1967. In 1966 the Federal Republic of Germany produced 35·3 million tons of crude steel, and that figure rose by over 10 million tons to 45·3 million tons by 1969. The lesson has been that nationalisation has been a failure, that the industry has not invested and has not increased its production of crude steel. Of course there may be some reason for this. If a country has a stagnant economy, there is no point in producing steel if there is no market for it or no export market to which it can be sent.

    I thought that the right hon. Member for Newton (Mr. Frederick Lee) was very genuine when he mentioned that he was responsible for the coal industry when it wrote off £415 million. Taking the Bill into account, I find that the nationalised industries have written off no less than £2,934 million since the war, that advances to the nationalised industries total £10.312 million and that the addition to the National Debt since the war is roughly £10.000 million. Those are staggering figures for the shareholders of the British Steel Corporation and others, which we all are. Unless these industries are metamorphosed into something more efficient, we have not the remotest idea what will occur.

    I do not expect profitability to be reached by 1973–74, and I am concerned about what may happen then. We are told that the advances will be about £750 million. The right hon. Member for Barnsley (Mr. Roy Mason), then Minister of Power, said on 8th May, 1969:
    "After very careful consideration, I have concluded that an increase to £650 million is appropriate to carry the corporation over the next five years, and I accordingly invite the House to agree that the present statutory borrowing limit of £400 million be increased ultimately by £250 million."
    That increase was to carry us well beyond 1971, to 1974. Yet here the corporation is asking for a whopping sum well beyond the £650 million sort in 1969.

    The right hon. Gentleman said then:
    "The House will, however, wish to review the corporation's requirements some time during the course of this period."
    When I examine the Bill I find that the House will not review the way in which the moneys are spent over the course of the year. Normally we have a period in which the matter can come before the House and we can express our views, but that is not the case here. A substantial sum will be granted, and that is the last we shall see of it. The Minister will be able to hand it out to the industry concerned.

    My hon. Friend the Minister was right when he said that he did not expect that any dividend would be paid on the public dividend capital. The then Minister of Power said in 1969:
    "… we can see a distinct improvement in its trading position. Looking at the next few years as a whole, there would seem to be ample justification for this further experiment with public dividend capital." —[OFFICIAL REPORT, 8th May, 1969, Vol. 783, c. 685–687.]
    We have had no dividend from it, and we are not likely to have one. The public dividend capital seems to be a special account to which money is transferred prior to being written off. Therefore, we can expect that if the steel industry, the coal industry and the aircraft industry have that sort of thing they will be just putting money aside for eventual elemination. That is one way of deceiving the public but it will not deceive hon. Members.

    But I agree with hon. Members that if we are to consider a very short-term plan which is to take us no further ahead than 1974, and if we are to authorise the Government to make advances to the tune of £750 million, we should have before us the corporation's long-term structure and strategy, what will be hived off and what will be kept. In 1969 at least there were before the House a number of documents including, I believe, a White Paper, a document about which way the industry was going. Even though it was erroneous, it was there. All we have now is a factual White Paper dealing with the mechanics of what is to be written off, how the money is to be borrowed and so on, but there is nothing about long-range plans.

    It is interesting to examine the matter from another angle. I am concerned about the performance of the industry generally. Comparing the United Kingdom with West Germany, we find that by 1969 the worker in the British industry produced 93 tons of steel while the worker in the Federal Republic produced 184 tons.

    Does the hon. Gentleman agree that that figure is more a condemnation of the industry's failure to provide modern capital equipment than of the workers' inefficiency?

    I fully agree. I do not know whether the hon. Gentleman has been listening to me but I have looked at the period of nationalisation. Vesting date was somewhere about 1967. The amount ploughed in since has been very small compared with Europe. Only now, extremely late in the day, is more investment coming. The Germans have gone ahead. Let us worry not about the worker but about the structure of the industry. We cannot organise an industry by a disorganising principle, and that is nationalisation. But I do not want to go too far into that tonight.

    Throughout the world most companies are going over to the pure oxygen furnaces, including the L.D. and Kaldo furnaces. In 1969, 76·9 per cent. of steel produced in Japan was produced by the oxygen process. The Japanese are quickly closing down the out-of-date open-hearth furnaces. I am grateful to the hon. Gentleman for mentioning West Germany, where 46 per cent. of total steel was produced by the pure oxygen furnaces in 1969, at the expense of basic Bessemer and open-hearth furnaces there. In the United Kingdom the comparable figure was only 28 per cent.

    Therefore, I accept the hon. Gentleman's view that there was not enough investment. I have been fair to the British Steel Corporation because I have brought the figures up to date to cover the first eight months of this year, when our percentage was 38·1, but we are still lagging behind West Germany and Japan, which are the go-ahead countries. They have realised that the L.D. and Kaldo processes and other pure oxygen processes are the right ones. Progress has been made in the United Kingdom but we have not made enough. Will the trend be such that by 1974 we shall have got round the corner to be able to compete with Europe? I doubt it. Looking at the trend of past investment, I am dissatisfied. No matter what Ministers of either party may have said over the years, very few of the pledges have been honoured. Governments have consistently dragged their feet.

    But if we are to have the promised new green field steelworks, I plead that we should have it in the South-East where it will be in a position to compete with Western Europe, with the very powerful French industry on the Dunkirk coast, and where we shall be able to obtain the raw material from Sweden or North Africa in suitable craft coming up the English Channel. It would be right within the magic centre of European expansion. I was perturbed a little earlier by the observation, "If we go into the Common Market …". I think that it is only right that we should.

    There is a point that the Minister should consider on the question of his grand strategy. There is a paper circulating—I have not seen it but I have heard of it—stating that since the B.S.C. has 20 per cent. of the total European capacity for crude steel and as the Community is prepared to allow a figure of only 15 per cent., it will look very critically at any future expansion plan. The Community might be in a position to say to the United Kingdom, "You want to expand in a certain way but we feel that you have got enough already because you are a monopoly and hold a dominating position". If the Minister can produce this document, and it was referred to by a gentleman in The Times on 28th October, 1971, he should consider it very seriously.

    I pray in aid a recent case which appeared in the Financial Times of 14th December, referring to Continental Can's takeover bids. For the first time the Commission brought into operation article 86 of the Treaty. Article 85 had been considered in previous years but article 86, invoked for the first time, prevents companies from taking improper advantage of a dominant position within the Common Market, or a substantial part of it. The B.S.C. produces over 25 million tons a year. The next largest company is Thyssen/Mammesmann which has about 12½ millions tons a year, well down the ladder. Might it not be said that the Corporation should be examined under articles 85 and 86, assuming we go in?

    The Minister might ask where private enterprise comes into this. I understand that he was negotiating a short while ago with the Norwegians, possibly to build a plant in the United Kingdom. I regard this as forward thinking. The plant would be extremely useful if we had a little more competition in the industry. How far has this plan gone? Would the Minister say something about the Japanese steel exports to the United Kingdom which have been rising in past years? I am aware that there has been a voluntary agreement with the Japanese limiting the amount coming to Europe to 1,250,000 tons for 1972. I suppose we have to place our confidence in the Japanese abiding by their decision.

    What worries me is the amount of steel that might go to third companies inside the Common Market and then be passed on to the United Kingdom. The Japanese are interested in a plant in Greece and if they put their billets in there they might eventually be passed over to the Federal Republic, France and the United Kingdom because we would all be inside the same free market.

    May I mention the United States surcharge. Since one-fifth of the total United Kingdom tonnage of direct;eel exports goes to the United States we must be affected by this. As the President has now agreed to devalue the dollar and other countries have more or less come to an understanding whereby they will revalue their currencies I presume that the surcharge will go. I can see that the British Steel Corporation will be in a very serious position if the surcharge remains outstanding for many more months.

    I make a final plea. We have quite rightly had to grant this money because it is necessary to have the right investment quickly. I will not vote against the Bill but I believe the House should have a little more detail of the long-term plans. I am worried about whether the steel industry is heading in the right direction and I would like to be satisfied that it is concentrating on main issues and not bothering about a number of items which should have been hived off many years ago.

    7.15 p.m.

    I must confess an interest here. I am interested in that I seek to protect to the best of my ability the workmates who sent me here and to whom I owe a great deal. I react very strongly to suggestions that the blame for any difficulties in the industry rests on the shoulders of the workers. I am sick and tired of hearing the kind of bogus productivity statistics dealing with output per man which have been quoted against the British steel industry. If we look instead at unit costs there is a different story, and if we look at selling price it is a very different story indeed because British steel has consistently been able to sell competitively abroad. Any suggestion that British workers have been in the least Luddite in their approach is at variance with the facts.

    I did not blame the workers; I spared them any criticism. I said that the system was totally wrong and that nationalisation was leading to these results. We have to accept it. I could give additional figures which would verify what I am saying, but as the hon. Gentleman is making the speech I will not bother.

    The hon. Member for Bedford (Mr. Skeet) is a little too sensitive. I was referring more to the general attitude rather than to his own contribution. It is no good the Minister—and he has done this in the past when some of us have drawn attention to the sacrifices made by the British steelworker through his acceptance of the costs of change and modernisation—simply acknowledging this and paying tribute to it. The dismal truth about the industry is that redundancies and closures are at least up to or ahead of schedule and the future of the industry in terms of investment and new development is lagging sadly. The responsibility for that can only be laid at the door of the Government through their intervention, their long drawn-out review through the misbegotten study group, in the long-term investment clans of the British Steel Corporation.

    Grave damage is being done to the industry by every day of delay. Even disregarding entry to the Common Market, we are in a crucial period. European steel is at a point when great decisions have to be made. Almost certainly the future lies with the large plants on the coast with deep water terminals. There are only 15 such sites in Western Europe, six of which are in the United Kingdom.

    We are well situated and have natural assets, not only in the availablity of these sites but—something not so readily available in many of the European markets—in availability of labour. Sadly, we have a surplus of skilled labour traditionally tuned to the industry. We must have 12,000 steelworkers standing in dole queues now. In my area of Teesside, in the last year no fewer than 6,000 steel-workers have become redundant—men who have given their lives to the industry. They want to work but they cannot find it. That is a heavy price to pay for modernisation even if it were coming—but is it?

    The trend towards large coastal sites is generally recognised. Any objective study of British sites—and they would have to be brown field sites to produce the quickest return—must come down in favour of the Redcar site, which, although it is in my constituency, can be objectively defended as a natural site. I have every reason to suppose that, had it not been for the Government's intervention and study, the B.S.C. would sometime ago have made this decision and would have announced it.

    The loyalty of these men, their acceptance of the sacrifice of technological change, has been disregarded and thrown away, and possibly the future of the industry is being jeopardised. We need a viable, modern steel industry on Teesside, where so much of it developed. Teesside has all the natural assets, and an ore terminal which will by the end of next year be fully operational, in its first stage able to take 200,000-ton tankers and capable of expansion to 300,000-ton tankers, larger than any terminal at present in operation or possibly even envisaged, and with an available work force of 6,000 men unemployed.

    Understandably, my right hon. Friend the Member for Newton (Mr. Frederick Lee) did his utmost to draw to the attention of the House and the Minister the threat overhanging Irlam. I do not minimise it. But that is a small community dependent on this industry, and it is a threat to, say, 1,900 jobs. On Teesside there are 6,000 men not merely threatened but out of work, and the Government are still pussy-footing around the decision about a brown field site.

    If we are not to have a brown field site, how in the long term can the steel industry continue? Is that question still in the Government's mind? If we are to take the steel industry competitively forward into Europe and into the next century, the decision must be made soon, and I demand that the first decision the Government make should be in favour of this brown field site where work can start at the earliest moment. This would alleviate the savage unemployment position on Teesside and in Hartlepool, give an indication of confidence in the future of the industry and show that the Government are prepared to honour at least some of their obligations to the workers.

    7.23 p.m.

    I do not wish to take issue with the hon. Member for Cleveland (Mr. Tinn) except to say that his plea for the future of the industry is widely shared on both sides of the House. However, it is my considered view that the future of the industry can be solved only by a more fundamental approach than any which has been offered by right hon. and hon. Gentlemen opposite.

    It gives me no pleasure to be speaking tonight in support of this Bill. After 18 months in the House I should prefer to speak not in support of a salvage operation for the British steel industry but in support of a fundamental sorting out to secure its long-term future. I had hoped to be able to speak in support of many of the pledges made by my right hon. and hon. Friends when they were in opposition to restore the industry to private enterprise. All we are getting is a short-term measure which is nothing more than an admission of the failure of nationalisation.

    I want to speak for a moment as one of the long-suffering shareholders and taxpayers. An analogy has been drawn in the debate to an annual shareholders' meeting, but I have been brought up in a much harder school, and have never been faced with voting more than £350 million off my own capital in a business which is not insolvent.

    When one considers the balance sheet of the British Steel Corporation, one must admit that it is ludicrous to suggest that it is necessary to write off £350 million from the so-called capital equity. The balance sheet shows fixed assets before depreciation of nearly £200,000 million. The freehold properties alone amount to about £200 million hook value, but they must be worth considerably more. In addition, there are investments, quoted and unquoted, of about £80 million. One must ask whether this is a situation so desperate that shareholders are being invited to write £350 million off their capital? Is there not a case for looking again and, instead of writing-off taxpayers' and shareholders' money, releasing some of the corporation's assets and so providing the capital which is so desperately needed for modernisation?

    What does a capital reorganisation do to improve the long-term management problems of the industry? What does it do to ensure that the financial targets which have now been set again will be met? What guarantees have we as taxpayers, and what guarantees have the public, that the consumer will be served any better in the future than he has been in the past? The consumer includes, of course, the whole of British industry upon which our export market is dependent.

    Is it not strange that the British steel industry has failed to cash in on one of the biggest growth areas for steel in this country and abroad over the last few years, namely, the industrial gas-pipe industry? Is it not odd that the industry has been so uncommercial that it has failed to produce products which would allow British industry to get in on world markets, or even to supply more than a small proportion of the gas piping that is needed, for example, to develop North Sea gas and oil? Is it not also surprising that imports of steel have been maintained and are increasing at an alarming rate? One example of this is special forms of sheet steel, plastic coated.

    Now we hear strange noises that the British steel industry seems to be incapable of producing the product which may be needed for the more advanced type of nuclear power station, and that we might have to import special steel from the United States to maintain our nuclear power development.

    For 20 years the industry has been involved in a political dog-fight on this "Clause 4" fanatical obsession of hon. Members opposite for nationalisation. I am pleased to see that some of the fanatical Members have abstained from the debate tonight. During this period it was inevitable that the capital investment of the industry was being run down simply because of the threat and counter-threat of nationalisation. Figures have already been produced in the debate which confirm that under private enterprise the capital invested in the industry was far more adequate than it has been since.

    This brings me to my main theme, that nationalisation has produced a self-generating inefficiency in the industry; that it has produced a bureaucratic management structure; that it has developed an uncommercial approach to the production and marketing of steel; and that it has developed unenterprising attitudes to the industry.

    Would the hon. Member care to spend a moment or two explaining his argument about the nationalised industries? Would he compare them to the situation in Rolls-Royce just prior to the time when his Government came along to save that company? What kind of efficiency was applied to Rolls-Royce before it went bankrupt? Would he compare the two?

    If I were now on the Front Bench I would say "If the hon. Gentleman would care to table a Question, I should be prepared to answer it later." However, I do not wish to be distracted from my main theme since the situation in Rolls-Royce is in no way comparable.

    I do not see why my theme should be disrupted. I would prefer to carry on. The hon. Member has had his say, and I have been waiting for four hours to have mine.

    As I was saying, the inefficiency, the bureaucratic management, and the uncommercial and unenterprising approach under nationalisation have resulted in a lack of profits. They have deprived the industry of the cash flow which it had prior to nationalisation and have hindered the capital investment programme of the industry. Why, for example, has the steel industry not sold off more of its fringe assets, such as its surplus land and investments, in order to get a better return from which to modernise itself, which would at the same time secure the industry's future?

    The return on the balance sheet was ridiculously low. Surely the industry could produce a better return by selling off what it does not require, or what it could do without, and using that cash rather than asking the taxpayers and shareholders to write off vast amounts. Stainton & Staveley owns land in my area, and many of its houses—so-called tied houses—have nominal rents attached to them. Some of this land is desperately needed for development. But because of this paternalistic—indeed feudalistic—attitude, a non-commercial approach, the steel industry prefers to hog what it possesses rather than dispose of what it does not need in order to develop commercially its capital programme and to modernise.

    Nationalisation has propped up obsolete plant for many years, so that we are now faced with a sudden problem of having to close more plant than could have been phased out over a longer period of time if the programme had been properly managed. Nationalisation has subsidised inefficiency; it has held back productivity and isolated the industry from competition; it has stifled growth and modernisation. In other words, it has been a catastrophic failure for the industry and the country. It has failed to meet the demands of the market and its customers. It has been a drag on the taxpayer and a liability to the whole economy. How much taxation has the nation been deprived of since the industry was nationalised compared with the annual amount siphoned off in profits tax from individual companies before nationalisation? By comparison, how much taxation has the corporation contributed to the Exchequer since it was nationalised?

    This Bill, clearly, is a holding operation. It does not break the wasteful monopoly situation, and the only way in which a long-term solution for the industry's future can be achieved is by a far more radical policy. We must accept that nationalisation has failed, and we should set about returning the industry to private enterprise by breaking it up into three or four independent, integrated groups which would be in competition with each other and through which the industry could become profitable again and serve not only those employed in it but the nation and the economy as a whole.

    7.36 p.m.

    In listening to the speech of the hon. Member for Derbyshire, South-East (Mr. Rost) I was reminded of "Christmas Carol", which is a favourite story for all of us. One of the scenes in the story portrays Scrooge as the ghost of Christmas past. The Minister for Industry, who now occupies the Government Front Bench, must have felt very much like Scrooge because three or four years ago, when in opposition, he said exactly what his hon. Friend is saying today. But he cannot make that sort of speech now following a year in which we have had crises in U.C.S. and Rolls-Royce. Therefore, the sort of bland, private enterprise, buccaneering speech which his hon. Friend has just made is inadequate to the present situation.

    Perhaps the hon. Member is not aware that his hon. Friend the Member for Derbyshire, South-East (Mr. Rost) was making a completely different speech and was pleading with his Government to nationalise Rolls-Royce.

    I was wondering on which side of the House the Clause 4 fanatics were to be found. The fact is that the Government, in this year of trial and tribulation, have found that it is not so easy to carry out a doctrinaire approach as they once believed. Nor is it as easy to get private enterprise to accept back the proferred sweets.

    We read in The Guardian this morning that the private steel industry is complaining that it no longer can afford to buy back any assets which are hived off. It has also been suggested that the Government should lend it the money to buy the assets from the Government. If that is the sort of efficiency generated by the private steel industry it is no more immune from the hon. Member's tongue than any other industry.

    I should like to comment on the speech made by the hon. Lady the Member for Keighley (Miss Joan Hall) who brought in the analogy of the cotton industry. When the Minister for Trade presented the G.A.T.T. recommendations in the House recently, the hon. Member for Oswestry (Mr. Biffen) and I made certain comments. The complaint then made was that the cotton industry was being protected at the expense of the Third World. Therefore, the hon. Lady cannot argue that the industry is facing the undiluted wash of competition with tariff quotas, import percentages and so on whereas the steel industry is not.

    My point is directed to Clause 2 of the Bill. It is worth probing what is meant by that Clause. As I understand it the iron and steel activities in our publicly-owned companies go to the heart of what the corporation is about. They are what it exists to carry out. If the Minister suggests that this is merely a clarifying Clause, we must scrutinise it more carefully.

    The Explanatory Memorandum states that the Government have been advised that the Iron and Steel Act could be interpreted as giving the British Steel Corporation more limited powers than had previously been supposed. It goes on to say, first, that the narrow interpretation could call in question the corporation's right to dispose of any iron and steel assets that it might not wish to retain and, secondly, that it could be regarded as requiring the corporation to maintain the supply of every kind of iron and steel product instead of leaving the corporation reasonable freedom to decide this according to circumstances.

    Under what statutory provision does the corporation believe that it had that power? Which of the statutory powers is now being called in question? The provision involved may be Section 2(4) of the 1967 Act, which gives a right to the corporation to enter into any transaction for the acquisition of any property or rights or the disposal of any property or rights. Is it that provision which is being clarified and strengthened in Clause 2 of the Bill? If it is, what advice has been given to the Government about the validity of it? Is it beyond peradventure that the intention of the 1967 Act was to confer such a wide measure of freedom upon the corporation?

    The power which the Government now seek in Clause 2 would be a vital one if there were no other way in which the corporation could dispose of its assets or cut down on activities which no longer seemed profitable. However, as the hon. Gentleman knows, by Section 4 of the 1949 Act, which was resuscitated in the 1967 Act, a way for the corporation to dispose or divest itself of assets and of unwelcome or unwanted activities exists in Ministerial direction. It exists subject to two safeguards. The first is that a Ministerial direction can be given only if it can be done without prejudice to the proper discharge of the corporation's functions. The second is one which the House may want to examine more closely. It is that such a Ministerial direction is subject to the negative Resolution procedure of this House.

    As I understand the Clause, if it is giving to the corporation, by way of apparent clarification of an earlier power, an unlimited right to divest itself of any assets or of any iron and steel-making activities, it is doing it in a way which will circumvent another procedure which provides for parliamentary scrutiny of its actions. That may or may not be a good thing. But it should be argued by the Minister and he should not put it through in this enigmatic form without explaining the Government's thinking on the matter.

    If the hon. Gentleman feels that this should go through, will he bring in a provision, possibly in Committee, to make a decision of the corporation on what could be a major issue to divest itself of some of its assets subject to parliamentary scrutiny? If the corporation is allowed to do it without parliamentary scrutiny, all sorts of unofficial pressures from outside may be put upon it to persuade it to divest itself of any of its assets.

    Hiving-off is a political decision. As with any political decision, it should be subject to open scrutiny and political scrutiny. I believe that the Government should remove the suspicion which arises in the minds of some of us that their idea is to circumvent parliamentary scrutiny by Clause 2. If they will explain fully the thinking behind the Clause and undertake that Parliament will still have a rôle to play in scrutinising any proposals of the corporation, I am sure that they will remove our suspicions and. in consequence, dictate some of the Amendments that we table in Committee.

    7.45 p.m.

    I am sure that there is no ground for the suspicions which have been voiced by the hon. Member for Pontypridd (Mr. John) and that my hon. Friend will be able to clarify the position.

    I support the Bill. But, for anyone who has had any connection with the industry, it is sad to be debating this legislation at a time when the industry is still in such great difficulty. In spite of the protestations of the hon. Member for Ebbw Vale (Mr. Michael Foot) and other hon. Members opposite, I am certain that it would have been better if nationalisation had not taken place. However, I am less concerned with the ideological arguments than with making the best of the present situation.

    Our concern is primarily for those who work in the industry. They are not much interested in the argument about ownership. Above all, they want to concentrate on making a success of the industry and keeping it in its traditional place among the leaders of world steel makers.

    I believe that the Government's strategy for steel is the right one. It will help towards this success and get the industry into a profitable situation as soon as posible, ready for entry into the Common Market and ready for the progressive injection over the years ahead of more capital and the disciplines that that will bring.

    Given this strategy, the Bill in necessary. Certain of the financial provisions are distasteful, but they underline yet again that we have a Government which are not doctrinaire but practical. I support my right hon. and lion. Friends in this step forward that they seek for the industry.

    I welcome the firm commitment to settle, in the early months of next year, the long-delayed financial objective for the industry. This is a necessary discipline that we want to see as soon as possible. I hope also that my right hon. and hon. Friends will spare a thought for the situaition of the independent steel producers. In many ways they are hitched to the Brititsh Steel Corporation's chariot and squeezed between increased costs and price restraint, but they have not the beneficial capital write-off that the nationalised sector will enjoy.

    To the best of my knowledge, the private steel producers are not squeezed in any way on prices. They are free to charge whatever prices they choose. There is no control on private steel prices.

    Technically, that is right. But, naturally, they are affected in the same way as everyone else in manufacturing industry by the C.B.I. initiative. Their difficulty is that they may have to maintain price restraint, whatever the market may do in the next few months; at the same time, they have not the advantage of the capital write-off that this Bill will confer on the nationalised industry. That is a matter that my right hon. and hon. Friends must take seriously.

    Above all, the industry has two needs. The first is more confidence. The second is more competitive strength.

    As for confidence, surely it is urgent now that at all levels of the industry, starting at the top, there should be less time directed to Whitehall and Westminster and more time directed to the steel works and the markets of today and tomorrow. We must avoid a continuation of this shareholders' meeting at the centre, because that is what this debate is. That is the worst possible atmosphere for a large industry to be in when it is atempting to tackle its many problems.

    Let us try to speed up the necessary process of disengagement, so that, from the top through all levels of management and workpeople, more time can be concentrated on the practical job. This will also help to counter one of the unfortunate features that have arisen since nationalisation. I mean the number of promising managers, especially in the middle ranks of the industry, who have left steel for other jobs because they have been frustrated and have felt that they were spending too much effort on non-productive work. I hope that we are about to begin a happier chapter in terms of morale and satisfaction with the job.

    Turning to the competitive strength of the industry, I want to put forward four suggestions based on conversations which have had with former colleagues who are still engaged in the industry.

    First, organisation. Despite what has been said in one or two speeches, the idea of product divisions is probably right. The distinction between line and functional management seems to be establishing itself satisfactorily. The reason for doubt and uncertainty is the variable quality of management in the different divisions. I gather that things work well in the general and special steels divisions, but possibly less well in other divisions. This is a matter to which the corporation should attend urgently.

    Secondly, all is still not well at the centre of the industry. There is a need for further strengthening of the calibre of management at the senior levels of the corporation; for less decision-making in London and more decision-making nearer the works; for more people at the centre with direct works experience and fewer of those who have none

    Thirdly, we want a sharpening of decision-making throughout the nationalised side of the industry. The corporation is still far from achieving the excellent ideals with which it began of making individuals responsible and clearly accountable. Compared with the time before nationalisation, line managers feel further from the point where decisions are taken. Decisions seem to come from the machine, not from identifiable human beings. This is one of the snags of nationalising any industry. In a large industry it is bound to set up some kind of bureaucracy. The least we can do is to make sure that it is efficient bureaucracy. We are still far short of that in the steel industry.

    Fourthly, towards greater competitive strength, investment, expansion and greater efficiency have been mentioned in nearly every speech. I hope it will not be long into the New Year before we hear the results of the long-term review. We realise how complicated it is by the latest forecasts affecting all steel industries—Japanese and others—which are having to lower their sights for the remainder of the 1970s. The problem of forecasting with the size of investment involved is very difficult indeed.

    I welcome the go-ahead which is being given to a steadily increasing level of investment in the immediate future. It is vital that we should keep up a steady momentum of investment and expansion, not erratic fluctuations, whatever the decisions may be about brown field and green field sites—I do not want to enter into that controversy today. It is essential not only to the morale and wellbeing of the steel industry but also to the plant-making industry, for which the worst thing is the stop-and-start policy which it has had to endure so much in recent years. I was glad to detect that general tone in my hon. Friend's opening speech.

    The paramount need is to press on with modernisation, which means a steady momentum of rationalisation and, regrettably, of closures. Some courageous things have been said on this matter by hon. Members on both sides of the House. There is a risk that, with all the pressures which develop, particularly at a time of high unemployment, we may find ourselves forced into a number of half-baked compromises in particular situations where the necessity is to go boldly ahead towards our objective of a steadily more efficient and modern industry.

    The Bill, with considerable aid from the taxpayer, will give a boost to the B.S.C. and the whole steel industry. In return, we, the shareholders, have a right to expect new urgency from the corporation in getting its own house in order in such ways as I have suggested.

    My hon. Friend's general approach to the prospects for the industry was optimistic, and I welcomed that. I hope that the Government will continue to make clear, whenever they can, their determination that the British steel industry will be second to none in quality, in service, and in commercial enterprise, an industry in which its employees can take pride and enjoy good prospects in the years ahead.

    7.55 p.m.

    I sometimes follow the hon. Member for Cambridge (Mr. Lane) in debate. One difficulty which I always find is that his general sentiments seem all right but that he is sometimes short on detail. On other subjects I sometimes have the suspicion that he does not want to expose his less than radical views or the fact that he does not have all that much knowledge about the subject. However, on this occasion I harbour no such suspicions about him on this subject. If he has not gone into great detail I am sure he must have his own good reasons, because he could have drawn on his experience and thrown some light on the ideas which are under discussion in the joint steering group. I should have been greatly interested, because of his experience, to have heard some of his ideas on this subject. After all, although we are told that the report is almost ready, this is the last opportunity that Parliament has to try to bring some influence to bear upon one of the members of the joint steering group—Her Majesty's Government. The hon. Gentleman could have been helpful in trying to urge upon his colleagues in the Government some of the ideas which he might hold about the future development of the industry.

    There can be no doubt that if there has been uncertainty in the industry in the last year or two, it has had nothing whatever to do with any past arguments about public or private ownership to which so many hon. Members have referred this afternoon.

    I do not mind the hon. Member for Keighley (Miss Joan Hall), who is a neighbour of mine and lives in Barnsley, making a general speech which seemed more suitable for the Conservative Party conference than for a steel debate in the House of Commons, because there is and must be room for general contributions even on a specialised subject like steel. However, I object very much when hon. Members who ought to know better nip in here, make doctrinaire speeches attacking the management of the British Steel Corporation and the basis of the steel industry and condemning the public ownership principle on which it is based, and then nip smartly out again and do not even stay for the rest of the debate. These hon. Members will be noted by those who are engaged in the industry. Whatever excuses those hon. Members might make and whatever engagements they might plead, it is no excuse for making an attack upon the British Steel Corporation and then disappearing before the end of the debate.

    Hon. Members who do not represent steel constituencies, such as the hon. Member for New Forest (Mr. Patrick McNair-Wilson), who have no direct responsibility to people who earn their living in the industry, ought to be very careful about the kind of attitude which they adopt concerning this subject. If we are all agreed that this is a serious subject which should be seriously discussed, I should expect hon. Members to wait to hear whether other hon. Members might want to discuss the matter with them and to stand on their own two feet if that were to occur.

    A deliberate attempt is being made by some hon. Gentlemen on the Government side to misrepresent the position at the time when the steel nationalisation Bill was being discussed in Committee. There are now on the Government Front Bench some of the hon. Members who were present then. The hon. Member for Scarborough and Whitby (Mr. Michael Shaw) was also a Member at the time. The Minister will remember that the Committee stage lasted for more than 10 weeks because some of the hon. Members who were then in opposition and are now on the Government side used every possible opportunity to prolong the proceedings and have fierce debates on many subjects. The result was that there was plenty of time for us to contact people at all levels in the industry.

    What impressed me most from those contacts was the near-unanimity among directors of the major steel companies. One reason why they were not prepared to put up a great fight against public ownership of the industry was that they had no idea where the money which was required for large-scale investment was to come from if the industry was not nationalised.

    I see that the hon. Member for Bed-ford (Mr. Skeet), who was also a member of the Committee which considered the nationalisation Bill has now come into the Chamber. I remember that many people in the industry spoke about the need to invest between £800 million and £1,000 million within the next few years. Their view was that, the decision to nationalise having been made, the Committee stage should be allowed to proceed and long-term investment decisions should be made as soon as practicable. That was the view, with very few exceptions, of those who worked in the steel industry. It is, therefore, nonsense for hon. Gentlemen opposite to argue that the necesary investment would have been forthcoming from the privately-owned steel companies, that they had no investment problems and that they had the capital ready and were prepared to put it into the development of the industry. The opposite is the case.

    The absence of the necessary capital was one reason why there was no great fight against nationalisation. It is the reason why the Spectator, in its well-known survey before nationalisation, came down on the side of public ownership, with some qualifications. I knew of some of the people responsible for that survey. It was known that the necessary capital would not be made available if the industry remained in private hands.

    The reason why capital was not available was that the threat of nationalisation was hanging over the industry.

    The hon. Gentleman is indulging in party conference talk, and I thought we had moved away from that kind of thing. That is the slogan which he can repeat at his party's conference when his 4,000 representatives—there are no delegates—meet at Blackpool or Brighton. It will go down well there because only a few of those who will assemble there will know anything at all about steel and they will keep quiet, while the rest will not know any better. The shortage of capital for investment in the steel industry built up over many years under Conservative Governments and had nothing whatever to do with the threat of nationalisation.

    The necessary capital of between £800 million and £1,200 million just was not available. That is the amount that was considered necessary at the time when the Spectator carried out its survey. That was the view of the directors of many privately-owned companies. There must be some hon. Gentlemen opposite who had contacts among the directors of privately-owned companies. The Labour Party had no monopoly of contacts. There must be some hon. Gentlemen on the Government side who can confirm that the capital was not available and that there was no prospect of getting it on reasonable terms. It is nonsense to argue that investment decisions were influenced by political attitudes.

    When the Bill was being considered in Committee the hope among those in the privately-owned steel companies was that, the decision to nationalise having been taken, we would have done with doctrinaire attitudes and try to build up the industry as fast as we could. That is the consideration before us in this debate, and I therefore want to deal with this problem of long-term investment.

    It is essential for the sake of people in the industry, at all levels, that the Government should quickly take the country into their confidence and make known their long-term strategic investment plans for the industry. From what has been said so far, it seems to me that it will be extremely difficult for hon. Members and, indeed, for those in the steel industry to distinguish between what is Government-imposed, and what is proposed by the corporation. Whatever view one takes of who should own the industry, I think hon. Members will agree that it would be highly undesirable if those who are voting the sums of money that we are being asked to vote today, and those whose livelihood depends on the future of the industry, were not told what the steel industry itself is proposing and what the Government are trying, to force it to do.

    That matter is of great importance in two respects, the first being that of political accountability. It would be a serious matter indeed if the Government were to conceal from us what the corporation itself has done and what they have imposed upon the corporation in the joint steering group. This is not a mater of party controversy. How, when the report is published, will hon. Members know what the corporation wanted, and what the Government imposed, if we are not given the Government's point of view? I refer deliberately to the Government's point of view because it would be easy for them to let us know what they have in mind.

    It was the Government who insisted on the setting-up of the joint steering group. I have no information that the corporation asked for it, but if I am wrong perhaps the Minister will correct me. My information is that the Government have imposed this group on the corporation. The corporation had made its plans and put forward its proposal. I am glad that the Secretary of State for Trade and Industry has taken his seat on the Front Bench because I am arguing that if there is to be accountability to Parliament it is essential that we be told what proposals the corporation made to the joint steering group and what modifications the Government imposed.

    My information is that during the last two years the Chairman of the British Steel Corporation and the members of the board supporting him have put forward proposals for the expansion of the industry. The proposals include the build-up of the industry by the mid-1970s to a total annual production of 35 million tons, rising to about 41 million or 42 million tons by the end of the 1970s and the beginning of the 1980s.

    As Members of Parliament we knew from various contacts with members of the board over these last two years that they had precise ideas where this expansion would take place. Not all the final decisions had been made. Many were still being considered. But they had a fairly good idea of how they wanted it to go.

    Here I return to the cautionary and, to me, disappointing approach of the hon. Member for Cambridge when he talked, from his knowledge of the industry, of the Japanese industry and others having to put back by a couple of points their existing plans. That is no guideline for our steel industry. The hon. Member knows that our modern steel industry, unless in the next 10 years we go for a major expansion, will fall behind internationally altogether. It is not possible to say that we will cut expansion plans and still remain competitive with major steel producers. That approach is much more possible for an industry with a considerable number of large plants than it is for us.

    It would be highly dangerous if the Government were to impose on the joint steering group, when it comes to make its report, a half-hearted decision to go ahead with perhaps only one of the major projects, deciding to postpone for 10, 12 or 15 years or more the second large project. The Government should accept the proposals of the corporation as we know them and as we have heard about them and should give the steel industry the go-ahead. That is what all the people working in the industry are hoping for and what they are entitled to expect.

    Despite the serious immediate difficulties of the steel industry, this is the most important subject for debate today because this is the last occasion when we can hope in any way to influence the Secretary of State in the final decisions that have to be made.

    I turn to the intermediate position between now and the long-term planning period for the industry. There is no doubt that a number of projects need preparing and thinking about very early on. There is a general principle here which has always been accepted by the people who work in the industry on both sides and which is often quoted to us both by the Government and by some of my hon. Friends who know a great deal about the industry. The general principle of modernisation and rationalisation, accepted by both sides of the industry, is an incomplete statement of the position if one leaves it at that. We on this side of the House and the trade union side have always accepted the principle of modernisation and rationalisation on the clearly stated condition that new jobs for the industry must be provided pari passu alongside those that might have to go and that we would never accept the position of proceeding with the process of modernisation and rationalisation if there should be any slowing down in the development of new jobs in the industry. As the Secretary of State well knows, these are the two parts of the same principle. One falls without the other.

    Here again it is essential that the House and the industry should know whether the original intention of the corporation to adhere to this principle and its two parts is in any way being interfered with by the Government because, as I understand it, the position of the chairman and other members of the board, in the encounters which I and others have had with them in recent years, was that the corporation accepted the two parts of the principle—that it was anxious, both as a good employer and in the interests of those making a contribution at all levels of steel-producing, to see to it that new job opportunities were created on a much more modern level and that there would be a vast programme of retraining to help those who had worked the old methods so that they could be brought forward to work the more modern plant.

    Humanitarian grounds are a very important consideration because we do not want to throw people on the scrapheap. It is important to the long-term viability of the industry to retrain the personnel in the modernisation of plant and this has had full support from everyone in the industry, who felt part of the process.

    We hear a great deal about financial long-term viability but there are two aspects to viability. The first is the accountancy, the financial prosperity, aspect. The other is the human material within the industry. An industry which does not have really good long-term prospects and which is prevented from pursuing the large-scale expansionist policy which the corporation wants discourages the very people whom the industry must retrain if it is to have a long-term viable future. It is not just a matter of humanitarianism but of good hard-headed business sense, giving the industry the prospects that will ensure that its people are ready for retraining.

    It would be a dangerous development if people were being asked to retrain within the industry without any certainty of employment in more modern plant because that more modern plant might not be there. Some of them would feel that it would be better to go outside the industry. It must be established that steel is a major growth industry and, therefore, the long-term decisions which the Government are to announce will set the task for the industry over the next 15 or 20 years.

    I want now to move to a perhaps more geographically limited problem. Within the whole prospect of the industry I am vitally concerned with the future of stainless steel, as are some other hon. Members. On this occasion it is essential for me to look at the whole of the Sheffield area, however, and not just at Stocksbridge which happens to be in my constituency. As the right hon. Gentleman knows, in the whole of the Sheffield area we have excellent personnel with great technological experience and knowledge in the making of stainless steel. This is one of the major national assets in the industry but it is clear that over a number of years not half enough new capital has been invested in that part of the industry in the Sheffield area. Therefore, from the national point of view the Government should examine the problem and make quite sure that over the next few years a considerable amount of new capital is invested in the area.

    But here we come to another point which is of considerable importance. No policy can succeed if it is determined by ideas about hiving-off or changing about purely on the grounds which were indicated by some hon. Members opposite. Another principle is involved here which is worth recalling at this stage. It was the principle that, whatever might happen in the future, if there are to be changes on the borderline because a sector was left in private ownership when we nationalised the industry, the rationale of any changes was always to be the most rational organisation of the industry.

    Therefore, the Government would be doing a disservice to the future of the industry if, either for short-term financial reasons or to please some of their supporters, they were now to substitute a doctrinaire principle when considering this part of their policy.

    Some of my hon. Friends have raised the question of Clause 2 which refers to this subject. I hope that the Government will give a firm assurance that their future policy will be as envisaged at the time of nationalisation—that there may be adjustments on both sides of the line and that in some cases it will be essential to take a further part of production capacity into public ownership whilst it may occasionally be necessary to have an adjustment where there is rationalisation on the other side of the line. It was always understood that such adjustment should be kept to a minimum and should never be decided for financial reasons but only to improve the technological efficiency of the industry. There is a considerable weight of opinion in the Sheffield area in favour of extending public ownership rather than the other way round.

    I am encouraged to have the support of my hon. Friend, who knows a great deal about the industry in his area and in the whole of the Sheffield area. This is an understanding that we in the Sheffield area—trade unions and Members of Parliament alike—had reached with the corporation. A few years ago we had a meeting in Sheffield with the chairman of the corporation at which this was the main question under discussion and at which we reached the understanding which I have outlined. The Government would be embarking on a dangerous course if on doctrinaire grounds or on short-term financial grounds they were to depart from this policy.

    I turn to the consequences of the figures mentioned in the Bill. The hon. Lady the Member for Keighley mentioned the amount of money which would result if the additional financial provision made by the Bill were to be divided by the number of citizens of the United Kingdom. This is not a serious consideration. These sums are of great importance because the future of the industry is at stake. We are discussing the proposition whether there is to be a modern British steel industry in 12 or 15 years' time. Obviously we do not get far if we divide the sums mentioned in the Bill by 50 million. We must consider whether sufficient provision is made in the outline that the Government have given us.

    I was disturbed by the Minister's statement that he expected the corporation to limit itself severely in its policy to increase the price of its product. The Minister is not comparing like with like. It is understandable that the Government should think that if industrialists reach agreement to accept a proposal made by the employers' organisation to limit themselves in their price increases, everybody should be encouraged to follow suit.

    Among the many privately-owned concerns which have accepted the proposal of the Confederation of British Industry are some which were increasing their prices considerably at the time that the Government told the corporation that it was entitled to only half the price increase which it had suggested. The Minister for Industry knows this because he had to announce the decision to the corporation and to the House. Therefore the corporation has been forced to fall behind. It was not able to increase its prices sufficiently at an earlier stage.

    The Government have argued that one main reason for their adopting that course at the time, though many of us disagreed with their decision, was that by forcing the corporation to go for only 50 per cent. or 60 per cent. of the increases it had proposed it would be possible to keep the price of steel cheap for the rest of British Industry.

    This has been the history of the coal industry, too. For years the coal industry has been required by the State to keep its product cheap and has thereby provided the basis for success for large numbers of British firms which, if they had had to pay the market price for their fuel over the years, would have had a different !ale to tell in their balance sheets.

    If the Minister were to argue that it was essential to ensure that the price of steel was kept not too high for consumers, he must now give additional consideration to the corporation's request that, as it was not allowed on good, sound national grounds to increase its prices when it wished to, it should be given a special dispensation now to increase its prices by more than the 5 per cent. which was proposed by the Minister this afternoon.

    It is important, from the point of view of the future of the industry and of inspiring confidence in those working in the industry, that it should not for ever have to ask the House for additional credits when there has been additional deficit. It does not help to maintain morale in the industry if the Government have to come back to the House time and time again. It opens the door to all those ignorant attacks upon the industry which we have heard this afternoon.

    My last point concerns the policy of the corporation. I will not conceal the fact that, although I have so far mainly criticised the Government, in recent months I have been beginning to think that the corporation also could do more to obtain confidence among those who work in the industry. In a number of factories, including the Stocksbridge plant in my constituency, there are what I would call creeping redundancies. The Corporation is under constant pressure to produce more steel with fewer people but it must adhere to its chairman's original pledge that it would not succumb to these pressures. This is a field in which responsibility cannot be easily determined. The Minister likes the corporation to make all the announcements of redundancies, so that he can say that it has nothing to do with the Government.

    We must know the truth of the statement, which I have heard a number of times, that the Government are putting pressure on the corporation to accelerate redundancies so as to make the financial picture more acceptable. This would be a disastrous policy on any account but it is particularly disastrous now. If there are any grounds of public policy on which the Government should change their course, it is here. There is no improvement in unemployment and no alternative jobs are available. I am informed of a proposed total of 248 redundancies in three months at Stocksbridge steelworks, spread over five sections. Even skilled men cannot be certain of alternative jobs.

    The union is doing all it can to reduce those redundancies but the Government should assume their responsibilities and urge the corporation not to yield to the pressures to go on with the slimming-down process. There is everything to be said on grounds of public policy for deliberately slowing down the process and keeping people at work. The Minister should defend that decision to his back benchers, who may know no better and attack him because of the corporation's financial position.

    I am fortified in this view by what the Government are themselves doing. All the work-producing projects which we have urged on them for over a year, and which they have adamantly refused to consider, they are now bringing forward on precisely these grounds of public policy. They are urging local authorities to hurry up with local works for which we could get no support from them a few months ago. They are beginning to show some understanding of the public industries and are asking them to spend more, so there is surely an equally strong case for discouraging the corporation from going too fast in this slimmingdown process and for encouraging it to keep people at work until the industry picks up.

    The steel industry's level of output is determined by the general level of economic activity. The steel users and their requirements determine the level. But within that general consideration there is also the peculiar way in which the development of steel production has been observed over a number of years. This proposal too was discussed in Committee when the industry was nationalised. I recommend the Government to re-read our discussion on this subject and to encourage the corporation, on the lines of an earlier proposal, to stock certain quantities of steel.

    The Government should tell the corporation that the amount of money required to stock—it would be far less than coal because steel needs less space—and all the financial considerations involved would be taken care of. The steel stocked will not be sold now, so there will be no income from it, but it is well known that the industry has its ups and downs. At present, people are reluctant to order, but if there were an upturn in the economy, as we all hope, in six or nine months, those who want steel will want it in six, eight or four weeks, and that is when the producers will say, "Sorry, you cannot have it because we have not got it".

    Not every kind of steel can be stocked but the specialists agree that some types, including the major bulk products and some special steels, can well be stocked. I hope the Government will urge the British Steel Corporation to stock quantities of steel and so keep people at work when they would otherwise be made redundant. When the upturn in the economy comes, which we hope will be soon, those stocks can be sold. I commend this idea to the Government and hope that some observations on it will be made when the Minister replies to the debate.

    8.35 p.m.

    I hope that hon. Members will forgive my absence during the earlier part of the debate. I have been taking part upstairs in the Committee deliberations on the commercial radio Bill, which the Government regard as important. I regard it as more than unimportant. It is a disgrace that the House of Commons is having to waste time discussing a trivial Bill of that kind when unemployment is at its present high level.

    I therefore apologise for not being here earlier, and, as those Committee deliberations may be continuing later, I apologise in advance because I shall have to leave before the end of this debate.

    The Bill before the House is being considered at a time when the steel industry and the British Steel Corporation are in a period of crisis and depression. That state of affairs springs largely from the policies pursued by the present Administration, policies which in my constituency have produced an unemployment situation which we have not witnessed since the thirties. At the latest count for which I have figures, on 8th November last. 3,118 men and boys were out of work, representing a total of over 8 per cent. male unemployment, a significant part of which has been due to the Government's policy towards the B.S.C.

    I appreciate that throughout the non-Communist world steel producers have in the last 12 months been experiencing diminished order books. Wherever one looks one sees a picture of steel companies in difficulty. That applies in Germany, Italy, America and even Japan. But compared with the fall in the total production of steel in the E.E.C., Japan and America, we in Britain have not only suffered from the general fall in world demand for steel but have suffered twice as badly. The official journal of the Iron and Steel Trades Confederation, Man and Metal, stated in its November. 1971, issue:
    "the cut-back in Britain is far more drastic with a 10·3 per cent. reduction in output—twice as high as the free world figure."
    This is where Conservative policies have led us. They are largely responsible for the 8 per cent. or higher male unemployment rate in my constituency.

    I have never known a time in the steel industry in my constituency when there have been such low hopes and depression. If the Secretary of State questions this, I recommend him to go to the Park Gate Iron and Steel Works, which is partly in my constituency and partly in that of my hon. Friend the Member for Rother Valley (Mr. Hardy). There is a crisis of confidence which has resulted from the policy of the Government towards investment and from the well-known intentions they have had to sell off wherever they can.

    The steel workers in Rotherham are well aware that the Government would like to sell Steel, Peech and Tozer to private enterprise. If ever they tried to do so, the troubles they had at the River Don works in Sheffield would be repeated. My steel workers are in no mood to tolerate such a policy.

    I have two proposals to make. My area is traditionally an area of heavy steel production. A skilled labour force had been built up over many years. At a time when hon. Gentlemen opposite are always eager to talk about the strike records of this industry or that industry, the strike record of the steel industry in my area is virtually a non-strike record, whether one looks at the last couple of years or the last three decades. There is a highly-skilled labour force, year after year, week after week, put on to the labour exchange. As a result of the Government's policies, already men have been declared redundant in an area where it is almost impossible to get another job. There has been a speeding up of closures which should not have occurred until the mid-1970s at least, and in January, 1972, more men will lose their jobs and go to the labour exchange because of the Government's policies.

    Lord Melchett, according to Press reports, is said to be in favour of a consortium with European steel producers. One possibility is that there will be a jointly owned steel works somewhere on the Continent. I hope that the right hon. Gentleman will tell Lord Melchett that the steel areas of Britain will have none of it. If the British Steel Corporation has a responsibility, it is to be putting up new plant and using its new investment in these Islands.

    A very high priority should be given to the existing steel areas. I see very little point in developing a massive new steel complex in the south-east corner of England, the area with the greatest build-up of population and in which, by the end of the century, there will be enormous problems of housing and communications. If a steel complex were to be set up, what does Lord Melchett want? Does he want another massive migration from the Ebbw Vales and Rotherhams? We saw that kind of migration in the 18th and 19th centuries. There is no reason for it any longer; nor is it the most sensible and economic way to carry out such a project.

    If there is to be a green field site, I hope that it will be within reasonable distance of the existing steel areas where all the expertise and the labour force are concentrated. In my constituency we hear very little about investment programmes from the British Steel Corporation. This is one of the reasons why morale is so low at the Park Gate works. I understand the attitude of my constituents in those works, who are now faced with a situation, as Press reports are indicating—I believe them to be true—that some of the electric arc furnaces installed only a few years ago at Steel, Peech and Tozer are to be taken down the road to the Park Gate works. The Park Gate works needs some electric arc furnaces, but I am not prepared to accept that there has been a sufficient fight by the local management of the British Steel Corporation if it accepts that situation when it is clear that expansion is needed at both Park Gates and Steel, Peech and Tozer. I hope that the hon. Gentleman will be able to give some comfort to my constituents.

    The Government's policy on many matters has changed in the last 18 months. Their earlier policies have produced such a shambles that they have had to go back on them. They have been discussing with the British Steel Corporation the situation of the River Don works. There has been a big turn-around there. Certainly hon. Gentlemen should not assume that even the revised proposals which allow for hiving off of part of the River Don works will go through with the acceptance of the shop stewards and the work force. Any firm that believes that it can take over part of a nationalised industry should understand that it could well lose that part without compensation.

    My hon. Friend the Member for Peaistone (Mr. John Mendelson) said that there was a case for extending the public sector steel industry in Sheffield. I agree. But what is more important is that the steelworkers in the Rotherham-Sheffield area also agree very strongly. When a Labour Government are returned to power there will be strong pressure from the steel areas to extend the public sector. Any firms that think that they can push their snouts into the gravy bowl and take over some of the most profitable parts of the corporation when a Tory Government are in power should be aware that there will be strong pressure for the sections taken over at least to be taken back into public ownership, where they belong.

    I am concerned to see that the Rotherham area gets its proper share of investment, but there is no indication that that is what will happen. I hope that the Minister will say something about that.

    My last point concerns the level of some types of steel imports. We are discussing a Bill which increases the corporation's borrowing powers, a Bill which meets a financial crisis of the corporation. One of the reasons—I do not say that it is a major reason—why the corporation has such depressed order books in some sections is the level of imports. In Man and Metal, the journal of the Iron and Steel Trades Confederation, the principal subject in November was steel imports from Japan. The journal said:
    "According to Mr. Ridley, Under-Secretary of State for Trade and Industry. imports of crude steel from Japan during the first eight months of this year reached a total of 26,560 tons—nearly thirty-two times the amount of 842 tons imported from that country in the same period last year.
    "Apart from crude steel there was a fourfold increase in imports of bars and rods from Japan, a fivefold increase in tubes, while plates and sheets increased eight times and strip twenty-seven times more than the 1970 figures. Altogether the Japanese sold us £3 million worth of steel and steel products in the first eight months of last year and £11 million worth by August of this year."
    The challenge which all the European steel producers face as a result of the difficulties the American market now presents to Japan is well known. It is a source of worry to steel producers in the rest of Europe as well as to the B.S.C.

    The conventional wisdom on free trade versus protection swings relatively slowly, but it does swing. It has swung in this country, from the great debates in the House during the 1840s and onwards. I have never been philosophically attracted to either proposition. I am sure that the purpose of any nation's trading policy and any restrictions that its Government put on imports should be based not on a philosophical stand on the matter but on how, consistent with the general national interest, a particular industry, a particular section of the country, is affected by its relations with the industrialists of another nation. I do not believe that merely for the B.S.C. to send representatives to Japan to seek a voluntary agreement is adequate. I have serious doubts about the value of any such voluntary agreement. It would be proper for the Government to consider the possibility of putting firm upward limits on steel imports from Japan and other countries.

    Will the hon. Gentleman not face up to the realities of why more steel is being imported from our free enterprise competitors in Japan and on the continent? It is because the British steel industry has not been able to deliver the goods at the right price.

    That is the second time in successive debates on the steel industry that the hon. Gentleman has intervened in my speech, but he must start doing his homework. He knows the situation in Japan where their products are sold at one price on the home market and their surplus capacity at almost any price they can get overseas. If the hon. Gentleman is saying that the real difficulty is that the British Steel Corporation is inefficient or its prices are too high, he is forgetting that the private enterprise European steel producers are facing exactly the same difficulties. For a long time British steel prices have been lower on the home market than continental steel prices on their home market.

    I do not think I ought to blame the Government too much, because this goes beyond them. There is a view in the world that there are great advantages to be gained through trade liberalisation. I agree, but in many areas there are not only no advantages but positive disadvantages. I would be failing my constituents if I did not say that I am not prepared to see experienced steelworkers out of a job as a result of unduly high levels of imported steel. It is not only the Japanese, because we know that the European producers are looking forward to the day when this country is a member of the Common Market so that they may try to flood our market with European steel.

    Lord Melchett—I think he is wrong—takes the view that it would be to our advantage to join the E.E.C. so that he can play at the same game. No one gains from this. I hope that the Government will look at the whole policy of steel imports, particularly Japanese imports. I have never noticed that the Japanese domestic market was open to all salesmen and industrialists. The Japanese have one of the most highly protected home markets in the world. Voluntary agreements are not enough, and the Government have a clear responsibility to act.

    A large number of steelworkers have either lost their jobs or been on short-time working as a result of the Government's policies, which inevitably hasten the process of rationalisation which the British Steel Corporation was carrying through. I do not believe that the British public will in future tolerate a situation whereby men are thrown out of jobs in large numbers and there is no alternative employment. The steel industry in future will have a somewhat smaller labour force. If the industry is allowed to expand, it can provide a large number of new jobs in our existing steel areas. We have a right to ask for that, and I hope the B.S.C. will be allowed by the Government to carry out that policy.

    8.55 p.m.

    The debate has nominally been about a Bill which, as my hon. Friend the Member for Ebbw Vale (Mr. Michael Foot) said, we shall not vote against. The critical issue is the injury inflicted on the British Steel Corporation by the Government's damaging and inconsistent policies.

    The first inconsistency is that what the Government have done completely contradicts what they said they would do. The Conservative manifesto at the time of the General Election said:
    " We will progressively reduce the involvement of the State in the nationalised industries—for example, the steel industry."
    Yet during the last 18 months the Government have not left the industry in peace for one moment. They have not left the industry free to make and sell steel and to provide secure employment for those who produce it. The corporation has been subjected to continuous interference by the Secretary of State for Trade and Industry and to a good deal of mischief by the Minister for Industry and the Under-Secretary of State.

    The Government came into office hostile to the nationalised steel industry and their approach to the industry has been motivated by that hostility. Confirmation of this can be obtained by reading the proceedings of Standing Committee A of May to July, 1969 which contain the speeches of the Under-Secretary, the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). If he serves on the Standing Committee on this Bill, I hope that he will be prepared to swallow many of the words he used then.

    The Government have apparently abandoned that approach and they have done so for two overriding reasons. The first is their panic at the shocking unemployment figures, the latest sombre instalment of which we have seen today. The second is the need to reconstruct the corporation's finances before membership of the Common Market hands over control from Bournemouth and Cirencester to Brussels. This was summed up in the Financial Times of 30th November as follows:
    "Because the rules of the European Coal and Steel Community prohibit unfair subsidisation, the Government dare not risk entering the Common Market in January 1973 with the Steel Corporation still in a deficit situation."
    That confirms what was said by the hon. Members for Oswestry (Mr. Biffen) and Bedford (Mr. Skeet).

    Every few months we have had a new Tory solution to the problems of the industry. First, we had the B.P. solution but that was ruled out by the Government's interventionist pricing policy, observed at its most shrill on that famous Friday afternoon when the Prime Minister petulantly decided to intervene and instruct the Secretary of State to issue the directive. That was the end of the B.P. solution. Then we moved to hiving off. In their first few euphoric months, Government briefings suggested that there would be immediate and large-scale disposal of the corporation's assets, but this was scotched by the Secretary of State's announcement to the House confirming the product division structure which had been devised by the corporation. That looked like the end of the second solution to the problems of the steel industry.

    We still have our suspicions about Clause 2 of the Bill. We shall want to look at this more closely in Committee since this matter was not cleared up by the Minister today. There are many ambiguous assurances which need to be made clear.

    I am sure that my hon. Friend will have read the interesting remarks of Mr. G. E. D. Halahan, retiring Chairman of the British Independent Steel Producers' Association, at its meeting yesterday. He complained that 87 separate hiving-off negotiations which had been going on had had little result. We do not know about these 87 hiving-off operations, and perhaps the hon. Gentleman in his reply could say something about them. Mr. Halahan gave as the reason the fact that there were no buyers and that there was a shortage of cash.

    Most ironic of all, it emerged that the private companies would like the Government lo set up a new industrial reorganisation corporation to help them buy up bits of the B.S.C. When the Labour Government set up the I.R.C., Conservative M.P.s became quite neurotic about what they called "backdoor nationalisatiton". It now seems that Mr. Halahan would like the State to finance backdoor denationalisation.

    In any case we have now moved to a new phase in which the Government see the nationalised industries and increased public expenditure as instruments for arresting growing unemployment and managing vital sections of the British economy. Even today the Minister for Industry announced that £10 million of minor works would be brought ahead in time for the B.S.C. to create job opportunities. We welcome this conversion.

    Perhaps the most urgent reason for the Bill from the Government's point of view is our possible entry into the Common Market. Assuming that we enter it, this exercise will never be possible again. The Financial Times clearly pointed this out, and other people also believe it.

    There are three reasons why the Bill is required now. The Government must bear responsibility for all three. The first is the economic recession in this country which has reduced the demand for steel and so cut down activity in the industry. The second is the Government's interference in the industry's pricing policy which, as the Daily Telegraph said on 8th December, has "seriously worsened" the situation; and the Minister admitted this this afternoon.

    The third is the arbitrary decision to end investment grants—a decision which was mentioned by my hon. Friend the Member for Ebbw Vale, and cogently denounced by the right hon. Member for Stafford and Stone (Mr. Hugh Fraser) in this House on Monday of this week in debating a Motion on exports. It is worth noting what the right hon. Gentleman said about the need for investment grants:
    "I beg Ministers to reconsider the whole question of investment allowances, free depreciation and investment grants. We can no longer afford to be doctrinaire about it. It is not a question of what we said in the manifesto or in our speeches. It is a question of what needs to be done now. I am all the more convinced today that the investment grant, especially if arranged in a more refined fashion, with precise emphasis on new, British, and preferably manufactured equipment, is an instrument which we should use once more."—[OFFICIAL REPORT, 13th December, 1971; Vol. 828, c. 106.]
    In a statement worded with studious moderation, the latest annual report of the British Steel Corporation mentions the hardship that the corporation has suffered and will suffer as a result of the need for investment grants. It said that the corporation
    "will not benefit substantially therefore from the supposed changes in the method of calculating allowances on capital expenditure in replacement of investment grants and will suffer a considerable reduction in cash flow."
    Before the debate finishes, the House has a right to know in precise terms how much the corporation has lost as a result of the abolition of investment grants. Various estimates have been made. It has been put at as much as £100 million in a full year. The calculation must have been made in drawing up the Bill. There must be a figure in the minds of the Minister and his Department. We expect the Under-Secretary of State to give it to the House when he replies. The calculation must have been done.

    We have heard the usual diatribe about the nationalised industries coming from the backwoodsmen opposite and from the backwoodslady, the hon. Member for Keighley (Miss Joan Hall), about how the nationalised industries have been discredited and the rest of it. However, I believe that we ought to spare the blushes of the hon. Member for Derbyshire, South-East (Mr. Rost) by not reminding him of the headlong recourse to nationalisation in the case of Rolls-Royce.

    The ills of the British steel industry are not due to nationalisation. They are due to the mess which mismanagement by private enterprise left behind for the British Steel Corporation to clear up. In every major steel-producing country in the world, whether the industry is publicly or privately owned, the need for rationalisation has been accepted. An interesting article on this matter by Colin Jones appeared in the Financial Times on 15th November. It said:
    "The creation of one dominant company in Britain may have been the result of nationalisation. But there has been almost as dramatic a degree of concentration on the Continent in recent years, resulting in virtually only four steelmaking groups in West Germany, two in France, and one each in Belgium, Luxembourg, the Netherlands and Italy. There have even been some important mergers in the Japanese and U.S. steel industries."
    Only the British privately-owned industry failed to take the necessary action, and the net aggregate loss of the corporation in the first four years since vesting has been £39 million. Calculated on the same basis, the aggregate loss of the companies now nationalised in the year before vesting would not have been £39 million over four years, but £50 million in one year.

    During the middle 1960s the ratio of investment expenditure to annual production in British steel was about half that of European countries and less than half the amount in the United States and Japan. We are pleased that over the next year it is planned that the corporation's capital expenditure should rise to about £250 million and even beyond that in 1972–73. But that is in the immediate short term. What every hon. Member on this side of the House who comes from a steel-making constituency cares about are the Government's long-term prospects embodied in the development plan. We have heard very little about them today. Everyone seems to have gone suspiciously quiet about them, including the corporation.

    The Minister has announced today that a deep-seated review will be completed by the end of this month and announced to the House next year. That leaves a number of questions unanswered. Will the review give the go-ahead for the corporation's long-range development plan or will a new development plan have to be worked out? Is the whole exercise to be started again or is this protracted review simply a smokescreen to hide the abandonment of any development plan? Certainly the centre-piece of that plan was a new greenfield steel works costing over £1,000 million.

    Now there are stories, which have been increasingly substantiated, of planned British Steel Corporation participation in what The Times on 25th October described as
    "a massive European steel-making complex".
    In the same report a senior executive of the British Steel Corporation is quoted as describing such a venture as "very, very certain". My hon. Friends the Members for Rotherham (Mr. O'Malley) and Penistone (Mr. John Mendelson) mentioned that aspect.

    If that were the case, where would it leave Hunterston, which sees a new green field site as the very heart of its hopes for economic regeneration in West Central Scotland? Where would it leave any other high unemployment traditional steel-making area in Britain which might also regard itself as a candidate for a new green field steel works?

    Can the British Steel Corporation—this is absolutely crucial to the whole exercise—maintain a long-range development plan which includes both a green field and the brown field plant for which Teesside is hoping—my hon. Friend the Member for Cleveland (Mr. Tinn) mentioned this matter—and at the same time make what The Times says will be a "large investment" in a European complex as well? Is that what the Government think that the British Steel Corporation can do? Can it maintain its green field site plan, the centre-piece of its development plan, its brown field site and also major investment in a European complex as well?

    Certainly the Iron and Steel Confederation, which no one would accuse of being one of the most militant of trade unions, has this week issued a grave warning against any move to locate a new steel works outside Britain at the expense of one in Britain, and it has directly accused the Government in these words:
    "The delay by the corporation in announcing their findings and in giving the go-ahead for the construction of new capacity is obviously being influenced by the Government's deep-seated review of the steel industry."
    I hope that the Government will take the opportunity tonight of removing all grounds for suspicion by flatly denying that they are either encouraging or acquiescing in any British Steel Corporation project which will take jobs out of Britain. I must tell the Minister that an industry like the steel industry not only depends on capital investment and sound imaginative management—these are extremely important and absolutely essential—but is vitally dependent upon maintaining the confidence and morale of those employed within it.

    If the Government were to connive or acquiesce in any decision to export expansion and job prospects to some fortunate country in Western Europe, it would be a slap in the face to those men and communities who have invested their lives in the future of British steel. The devotion of these men to their industry has been tellingly demonstrated by the successful fight of the men of the River Don works in Sheffield to save those works and maintain job prospects in their area. All the experts said that they could not win. That weekly authority on everything, The Economist, wrote the River Don works off while Dr. Finniston was actually in the city announcing its reprieve.

    That reprieve was the result of a campaign ounted by the shop stewards in close co-operation with my hon. Friends who represent Sheffield and the Sheffield area constituencies in this House and the Labour-controlled Sheffield City Council led by Sir Ronald Ironmonger. They were prepared to back the River Don works immediately, and that was crucial.

    It would have been an act of folly—the hon. Member for Oswestry agreed with this—to close down those works which are the only establishment in the country turning out the type of heavy forgings required by British heavy engineering. The men of the River Don works, my hon. Friends and Sir Ronald Ironmonger deserve the thanks of the Government and of the corporation for saving them from themselves.

    That is a fine start, and in the coming months—it would be even better if the Minister could announce it tonight—we look forward to the news that the original development plan of the corporation will go ahead. My right hon. Friend the Member for Newton (Mr. Frederick Lee) emphasised that that is the news which those who work in the steel industry need tonight. We look forward to con- firmation—we hope that we can get it from the Minister—that there will be expanded development and that it will be in Britain.

    The reprieve of the River Don works sounded the retreat as far as the steel industry is concerned, of the Government from their discredited lame duck policy with which the Secretary of State will always be associated. The Bill, by conceding a new capital structure for the steel industry, involving hundreds of millions of pounds, helps to turn that retreat into something of a rout. With one or two provisos which we shall explore in Committee, we welcome the Bill as a token that the Government have been forced, by the failure of their policies, to abandon some of their discredited dogmas.

    9.16 p.m.

    We have had a good and interesting debate, rather than a doctrinaire battle which has been a feature of previous steel debates. But, having said that, I must say that the hon. Member for Chesterfield (Mr. Varley) exposed himself as living in a world of fantasy. He dreams up policies which he believes the Government held, although they never announced them, and then claims it as a victory when the Government do something different. As far as I can make out, the hon. Gentleman seems to see a Conservative under every bed.

    The hon. Gentleman went on to talk about a European steel complex about which he has read in the newspapers, or somewhere, but he is again dreaming up a fantasy. It was almost as good a suggestion as that made by my hon. Friend the Member for Bedford (Mr. Skeet), that there should be a grass roots steel works in the South-East. I think that my hon. Friend meant a green field steel works, but the idea of a grass roots steel works is interesting.

    I must first deal with the fantasy of the hon. Gentleman that there is something sinister in Clause 2. The right hon. Member for Newton (Mr. Frederick Lee), the hon. Member for Ebbw Vale (Mr. Michael Foot), and the hon. Member for Pontypridd (Mr. John) saw something suspicious about Clause 2. I must make it clear that the powers which my right hon. Friend has under the 1967 Act allow him to direct the British Steel Corporation to dispose of non-iron and steel assets by laying an order which can be prayed against if it is objected to.

    My right hon. Friend has no power to order the disposal of steel assets. On the other hand, it has always been assumed that if it so wished the corporation could dispose of them, and under our predecessors there were several disposals of iron and steel assets—notably Round Oak—and nobody questioned whether they were possible or right, because they were management decisions by the corporation. Certain legal doubts have come to light about the extent to which it is correct for operations of that kind to be carried out, and the Government are simply taking the opportunity offered by the Bill to clear up the legal doubt beyond any fear of contradiction. Therefore, I think that hon. Members need have no worries about the contents of Clause 2.

    My hon. Friend the Minister for Industry opened the debate with a discussion of the world steel situation and the cut-backs which are taking place in Japanese production as well as Japanese investment planning. The same applies in Germany, where production has been cut back by 20 per cent. and 8,000 workers are on short time. There is the same picture in France and the United States. Indeed, it is world wide.

    I was asked for figures about the British situation. The corporation's production of finished steel in 1968–69 was 18·2 million tons; in 1969–70 it rose to 19·2 million tons; in 1970–71 there was a tiny drop to 19·1 million tons; in 1971–72 it is running at the rate of about 17 million tons, a figure which may have changed when we get to the end of the year. This shows that there has been a drop of about one-eighth in the demand upon the corporation, and this is the cause of short-time working, a lot of the redundancies and a lot of the current financial losses of the corporation.

    I do not understand how hon. Members opposite can say with such venom and certainty that it is all the Govern- ment's fault. The picture of world steel decline is clear. I do not see what the Government have done to cause it, and I would have thought that it would have been more constructive as well as more honest of hon. Members to admit that we live in a difficult phase for the steel industry and that we must be very careful to take the right decisions for the future.

    I ask the hon. Member for Ebbw Vale and others who talk about Government price intervention in the industry one question, and I would like the hon. Gentleman to answer it. What would have happened if the price of steel had been higher in the last few months? The demand for steel would surely have been lower and there would have been more unemployment. So, every time the hon. Gentleman stands up and screams at the Government, asking for price regulation of the steel industry to be abolished, he is calling for less production and less employment in the industry.

    In previous debates the hon. Gentleman called for the removal on doctrinaire grounds of any controls over any prices. I have never done so. What I have said is that, whether it applied to coal, steel or any other nationalised industry, if the Government thought it right to intervene to hold prices down in the interests of the country as a whole, they should state the financial consequences for that industry and not turn in the next breath and pillory it by saying, "You are responsible for running heavy losses".

    The hon. Gentleman is not in form tonight. That was the weakest answer I have heard for a long time about the fundamentally inconsistent position he has insisted on taking tie time and again.

    I go further. I will examine this question of price levels which the hon. Gentleman has talked about. Under the Labour Government and their Prices and Incomes Board, two price rises of the corporation were denied in full measure. In June, 1969, the proposed rise was reduced from 7 to 5¼ per cent.; in January, 1970, the proposed rise was reduced from 12 to 10 per cent. The first cut was worth £13 million and the second £20 million. The corporation's prices throughout the period from nationalisation to the General Election were consistently below the prices of steel in the European Economic Community. Demand was buoyant. It was boom time. All of that money could have been gathered. What was the sense of price restraint in a period of boom?

    The present Government allowed the first increase of 5 per cent. which was asked for by the corporation in October, 1970. The only increase we stopped was the 14 per cent. increase in April this year which we cut to 7 per cent. But by then the market had gone, and there are many—indeed, I am one of them—who believe that a 14 per cent. increase would not have stuck. If it had stuck, it would have created more unemployment than we have had and we have had bad enough unemployment as it is. Hon. Members have mentioned that the corporation has just cut the price of reinforcing rods, yet it was the corporation's intention further to raise the price of reinforcing rods.

    There is all the difference in the world between using powers of price control in a boom period, when one is throwing away profits which could be used for the benefit of the industry in the future, and using price control when the market is slipping to ensure that too much of the share of the market is not lost.

    I know that the hon. Gentleman would like to have an argument with me about the pros and cons of using price control at all. He finds it odd that I am advocating these policies. I find it even odder that he is advocating free market policies in relation to steel prices, which would have the effect of creating more unemployment.

    The hon. Member must have studied too deeply to have listened if he suggests that I have been advocating free market policies in this matter. I have not. I was suggesting that the Government, particularly the hon. Gentleman, had no right to claim that they and their civil servants had a better competence to judge price changes than the corporation. The hon. Gentleman in particular cannot claim that, especially when he and his' Government took credit in the middle of the year for saying "We are now grandly going to give the corporation the chance to settle its pricess". The Secre- tary of State took credit for that as well. A couple of months later the Government said "We are clamping down restraint on the corporation's prices". They have changed the policy again. The hon. Gentleman is now defending price control, which is what he spent most of his parliamentary life attacking. This is what he must try to explain.

    The hon. Gentleman himself has become a non-interventionist. He asks us to go in for more disengagement. He has attacked us consistently for trying to get the country's price structure more under control. That does not come at all well from his mouth.

    I have been asked by several hon. Members what has been the effect of all this price intervention. It is impossible to quantify exactly. The best assessment that we can made of the effects of Government intervention on actual price applications from 1967 to March this year is about £50 million to £80 million, before taking account of the benefit of price restraint on the corporation's own costs—for example, on its wages, purchases from other nationalised industries and the private sector, and so on.

    A large part of this cost was due to delay in implementing increases during the investigations of the National Board for Prices and Incomes in December, 1968, and June, 1969. The lower figure allows for a normal delay of about one month between application and implementation to allow for the consumer council process.

    The corporation says in its annual report for this year that, if it has been possible for the corporation to operate on the price basis of the European Economic Community since nationalisation, its results would have been transformed: the difference would have been about £250 million up to March this year. The corporation's proposals as submitted throughout have generally not been intended to match European price levels.

    Nevertheless, allowing for everything, the corporation's prices have increased by an average across the board of about 32 per cent. since nationalisation, which is a sufficiently large increase. It shows that the application of E.E.C. prices would solve the problem about which the hon. Members for Ebbw Vale and I have been arguing, that we would have a competitive market and that this would provide the substitute for Government intervention which the hon. Gentleman seeks and would indeed provide higher prices, and would have provided very much higher prices, to the benefit of investment, morale and the finances of the corporation.

    Several hon. Members have asked why we expect profitability to come in 1973–74. There are three good reasons. First, we shall be subject to the European Coal and Steel Community pricing régime. Second, by then there will probably be an up-turn in steel demand: the signs are that there will be. Third, some of the new plant now being installed will be coming into service and will make a contribution to the profit.

    'But then hon. Members, particularly those who join forces across the Floor of the House in not being absolutely certain about the wisdom of our decision to join the Common Market—amongst whom I would number the hon. Member for Ebbw Vale—asked "What happens if we do not go into profitability?" My hon. Friend the Member for Oswestry (Mr. Biffen) asked this question: "Shall we ever be able to do this again?"

    I hate to suggest that it will be necessary again, but, just for the sake of argument supposing it were, I do not think there is anything in the Treaty of Paris to prevent the writing-off of losses against capital. If it is a fact that losses have been accumulated, nothing could stop the balance sheet being purified by such a write-off. What would be unacceptable would be a balance sheet adjustment deliberately engineered to subsidise the price level charged by one of our companies or nationalised corporations.

    But I could not have better evidence than what the Community says about the White Paper which accompanies the Bill. My officials have been in touch with the officials of the Commission, who have already studied the White Paper. Their reaction is to regard the steps which we are taking as very sensible. But there is no need for the hon. Gentleman——

    I am sorry to interrupt the hon. Gentleman again, but we have a little time and this is a very important question. So many authorities on the subject, including, for example, the writers in the Financial Times, have said that this would be regarded as unfair subsidy. The hon. Gentleman says that his officials have inquired the view of Brussels of these proposals, and it is that they are very sensible. But that is not quite the question. The question is, would such an operation be regarded as unfair subsidy if we were in the Common Market? Was that question put specifically to the officials? Since the hon. Gentleman was in touch with them, presumably the question was asked, so perhaps we could have—if not today, in the OFFICIAL REPORT—a full official statement of what the reply from Brussels was to all the questions which the hon. Gentleman and his Department put to Brussels on this matter of unfair subsidy in relation to this White Paper

    I have made a very fair distinction, which the hon. Member can study by reading HANSARD tomorrow, between a deliberate subsidy in order to create an advantage and the need to write off the losses which can occur in any industry in the public or the private sector. I am sure that this is general on the continent when companies have suffered a lean period. That is a long way for me to go.

    Is it not true that, if the B.S.C. is not financially sound on entry of the Market, in effect the E.E.C. would frown on any of its expansion programmes, and that the Government are now providing the corporation with the money for this type of expansion?

    The short answer to that is "No". My hon. Friend the Member for Bedford asked a similar question: whether the European Commission would control the expansion of the corporation so that it did not reach a size to threaten true competition within the Common Market. I do not think my hon. Friend need worry about this. The power that the Commission has taken is to prevent mergers which would lead to units so big as to dominate the steel market. But normal expansion through investment and growth is not a matter which it would consider checking and I do not believe that there would be any question of the B.S.C. not being able to expand as it was required or wished to do.

    My hon. Friend the Member for Oswestry may be interested to know that there is no control over the siting of steel works in this or any other country under the Treaty of Paris. One need only look at examples of steel works in the South of Italy and France, sited for regional purposes, to see that national steel works can be sited wherever Governments want them to be established. I can therefore assure the House that a lot of the European bogies erected during this debate can be conveniently forgotten.

    My hon. Friend the Member for Oswestry described this debate as a doleful annual general meeting of shareholders, and certainly the figures before us are not at all pleasant. The corporation has already lost just under £40 million, we expect to lose £100 million in the year to come and there will be a loss of about the same order during the year ahead of that.

    It is not expected that any public dividend will be paid on any of the corporation's. public dividend capital This, on the basis of the beginning of the P.D.C. to the end of March, 1973, will, as it were, lose the Exchequer a further £250 million, money that would have been received if the capital had not been converted and had been remunerated at 6½ per cent., which is the average National Loan Fund rate.

    This means that the actual and expected loss, together with dividends forgone, will total about £500 million up to March, 1973. This is sufficient reason for the House to agree to the write-off proposed in the Bill because it clearly must be taken care of if the corporation is to have a healthy balance sheet in future.

    The debate has been constructive in the sense that all hon. Members have recognised that to get out of this situation we must do more to increase the efficiency of production, which must mean more investment. The hon. Member for Sheffield, Brightside (Mr. Eddie Griffiths), the hon. Member for Ebbw Vale and many others asked a number of questions about this subject.

    I must make it absolutely clear that the famine years for investment in British steel were 1967–68, 1968–69 and 1969–70. Private sector average investment was well over £100 million until, curiously, it dipped below that in 1964, when hon. Gentlemen opposite came to office. It then drifted slowly downwards until nationalisation was put through, when it fell even further, finally plummeting to only £39 million in 1969–70.

    The hon. Gentleman is deliberately misleading the House because when he talks about investment he should make it clear that the money spent in any given year is in respect of projects planned for and begun two or three years earlier. In other words, money now being spent by the corporation is concerned with plans, ideas and schemes originated some time ago, which means that the actual expenditure in the current year was started at least two and a half years ago.

    There is, of course, a time lag in investment. I am simply saying that in the middle and late 'sixties we in this country, through delay over the argument about nationalisation, had a very steep dip in investment in steel. The figures are incontrovertible. I have given them to the House once and I shall not give them again. But there is no doubt that this is one of the difficulties with which the steel industry has to cope.

    I should like to talk about what is taking place because, as my hon. Friend the Minister for Industry said, investment is considerably higher this year and it may be helpful to hon. Members who have constituency problems and have raised them in the debate if I deal with them at this stage before coming on to the long-term future of investment in the corporation.

    The right hon. Member for Newton referred to Irlam. The corporation is continuing its discussion with the trade unions and other interested parties following the recent agreement whereby the first phase of closure was accepted by the unions. The B.S.C. agreed to withdraw the second phase of the closure, and it will be willing, I am sure, to continue to consult fully as it has already done. It has also indicated that it is prepared to consider proposals for the works and private sector interests.

    The hon. Member for Flint, East (Mr. Barry Jones) asked me about Shotton. As he is not present I will only say that an investment of £20 million is going on at present.

    My hon. Friend the Member for Flint, East (Mr. Barry Jones) had to leave but wished to apologise for not being present.

    I felt that it would not be worth my while to go into Shotton in depth as the hon. Member was not present.

    The River Don was mentioned by several hon. Members and everyone accepts the fact that the proposals for the prospects of the works are now much more hopeful. I am afraid that there will probably be some redundancy. The B.S.C. has decided that it wants to keep its heavy forge going so that, subject to the outcome of further discussions with the unions, the jobs of the whole workforce of some 4,500 men are no longer at risk.

    I should like to give the House some thoroughly good news at this stage which I am sure will be welcomed on all sides. In his statement on 28th June, my right hon. Friend referred to further steps under negotiation to strengthen the Sheffield steel industry. I can now tell the House that the firms of Brown Bailey Steels Ltd. and Rotherham Tinsley Steel Ltd. have agreed on a merger between the two companies and are announcing the terms tonight. The Government, as a majority shareholder in Brown Bailey Steels, regard the merger as a desirable rationalisation of the private steel sector in Sheffield.

    I want to spend the last few minutes of my time talking about the future.

    The hon. Gentleman has talked about different areas that have been raised in the debate. The Scottish area was mentioned but he has said nothing about it.

    I apologise to the hon. Gentleman. I do not know the particular problem he put, but I will write to him if there is some point I have missed. One cannot deal with every point put during the debate.

    The hon. Gentleman rather took me aback when he mentioned the merger in Sheffield. He said it was to be Rotherham Tinsley with Brown Bailey. This is rather surprising because I understand that a week ago an announcement was made that Brown Bailey and Sheffield Rolling Mills were in discussions and that these had broken down. If the talks broke down with one firm it is rather surprising that less than a week later Rotherham Tinsley is brought in.

    Whatever may be the rights and wrongs of that, the Government are quite certain that this will lead to a strengthening of the private sector in Sheffield. I should have thought that that would have been welcomed on all sides for the future.

    I should like to say a word about the joint study steering group. A great deal of nonsense has been talked about it. The hon. Member for Ebbw Vale spoke about a pantomime horse, which was a colourful description from a first-class trapeze artist. There is no interference with the structural relationship, with my right hon. Friend's responsibility to manage his powers under the Iron and Steel Acts and to decide on the corporation's future investment programme. I do not believe that anything has taken place in regard to the planning of investment which is in any way contrary to the report of the Select Committee on Nationalised Industries or which in any way blurs my right hon. Friend's responsibility to settle the investment programme while the B.S.C. carries out its task of management.

    Nothing that has arisen as a result of the deep studies has interfered with the B.S.C.'s current investment programme, with the saver of the £25 million worth of schemes which my hon. Friend mentioned earlier. The investment programme is mounting; it is gathering momentum. It cannot be said that the B.S.C. has been held up by the existence of the deep study. It does not take decisions. It is under the authority of my right hon. Friend, and it does not supervise every penny spent, as the hon. Member for Brightside seemed to think. Its purpose is to do the basic spadework on such matters as demand, exports, the world environment, the competitive position of the B.S.C., likely technological changes and some of the main consequences of alternative strategic options. The main purpose is to form a background for the B.S.C.'s major development proposals which will require assessment and decision by the Government in the next year or so. It will be for the corporation to identify the relative advantages of further development expenditure at the existing Heritage sites as against a new site. By increasing the capacity of the Heritage sites there is always the risk that scope for a major new development may be reduced.

    This is a very important matter. The hon. Gentleman seems to describe the joint steering group as if it were perfectly normal—indeed, a process so estimable that it should be extended to every other industry. But is it not the case that the corporation is eager to bring the arrangement to an end as speedily as possible, and that it regards it as a derogation of its proper responsibilities under the Act?

    The hon. Gentleman seems to know more about what the corporation thinks and wants than I do, because that is the first I have heard of that.

    My right hon. Friend is in the position of investment controller or banker to the industry. He has every right and every duty in investing the large sums of public money involved to determine for himself the rights and wrongs, the truth and accuracy, of all these matters. It seems to me that hon. Members today have been trying to do the work of the joint steering group without half the expertise, time, knowledge or facts that are at its disposal. Some hon. Members have said, "We must expand and conquer world markets." Others have been saying that a new steel works must be built at Sheffield, on the South-East Coast or at Ebbw Vale. Others have said that we must have a new green fields site, or even two. Hon. Members have been deciding these questions without having done their joint steering group work.

    The hon. Gentleman nipped in, made a nippy speech and nipped out. I will not give way to him now. I will only say——

    On a point of order, Mr. Deputy Speaker. The hon. Gentleman has just made a false accusation.

    Before the hon. Gentleman raises his point of order, it is clear that the Minister has said he will not give way. The hon. Gentleman knows that in those circumstances he cannot intervene. If he has a point of order I will be glad to hear it.

    It is that I have been here since the beginning of the hon. Gentleman's speech. He has just made a false accusation against me and he ought to withdraw.

    Will the hon. Gentleman allow me to intervene, on investment? He ought to give way. I was here all day.

    The hon. Gentleman knows that he cannot intervene unless the Under-Secretary gives way.

    I thank the hon. Gentleman for giving way. On this point of investment, does he not know that the corporation made precise proposals to the Government over a year ago and that the chairman of the corporation has maintained ever since that the delay made it more difficult for the corporation because it increased the cost of the projects?

    I am glad that I gave way because I can tell the hon. Gentleman that what he is saying is simply not true. There are no specific proposals before the Government which have not been approved. The plan nut forward earlier was not in a form which could be approved at that stage. There can be no doubt, from my experience, as well as from my right hon. Friend's strong feelings, that without this deep, searching analysis of the industry it would be wrong to reach decisions which might be bitterly regretted and for which we would have to pay in taxes. That is why we are making sure this will not happen. If it was not for mistakes made in the past, we would not have the Bill before us now leading to increased Government subvention to the industry. I hope that this will be the last time we need to bring this sort of Bill before the House and that the steel industry will be able to create a prosperous, expanding and successful job environment as well as being an earner of foreign exchange.

    May I intervene before the hon. Gentleman sits down? He has a moment to spare although he said that he was pressed for time when be refused to give way to my hon. Friend. Will he tell us whether the joint steering group arrangement, which he has been advocating as if it is a general system of which he approves, is to be brought to an end? When I and my lion. Friends representing steel constituencies visited the right hon. Gentleman he said he would bring the first joint steering group to an end as swiftly as possible. As far as I can recall, he gave an undertaking that as soon as this operation was ended, the second joint steering group would be brought to an end. He certainly did not defend it on the basis that the hon. Gentleman has done. I say it is quite wrong that the responsibility between the Government and the corporation should be blurred in this way. That was the view the Secretary of State gave us earlier. If there is a departure from that and the joint steering group is to continue, we want to be told what is the Government's policy. When is this group operation to be brought to an end?

    My hon. Friend the Minister for Industry told the hon. Gentleman in opening the debate that he expected the report would be with his right hon. Friend in a short time and he hoped that a statement could be made to the House soon after we reassemble in January. By definition, if the report is in my right hon. Friend's hands, the work of the steering group comes to an end and there is no change from the original position. The first report has been received, the second will be received soon and a statement made to the House in the New Year.

    Order. Is the hon. Gentleman giving way to the right hon. Gentleman, or has he finished his speech?

    On several occasions the question has been asked from both sides of the House as to the global size of the steel industry. A figure of 40 million tons has been mentioned. Are the Government in a position to say that there will be no diminution of that global figure which has been estimated in the past to be the size of the steel industry?

    I cannot possibly anticipate the results of this review. The global figure has no time scale, it is meaningless. It depends how many years are taken. The last thing I would wish to do would be to make a statement which my right hon. Friend will make in the New Year when I have not the slightest idea what that statement will contain.

    Question put and agreed to.

    Bill accordingly read a Second time.

    Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

    Iron And Steel Money

    Queen's Recommendation leaving been signified—


    That, for the purposes of any Act of the present Session to make new provision with respect to the finances of the British Steel Corporation, it is expedient to authorize—
  • (1) the release of that Corporation from their liability to repay an amount not exceeding £150 million in respect of the principal of money borrowed by them under section 19(2) of the Iron and Steel Act 1967;
  • (2) any increase in the sums falling to be paid out of or into the National Loans Fund or the Consolidated Fund, or out of moneys provided by Parliament, in consequence of any provision of the said Act of the present Session increasing the limit in section 3 of the Iron and Steel Act 1969 from £650 million to an amount not exceeding £1,250 million.—[Mr. Ridley.]
  • Superannuation Bill

    As amended (in the Standing Committee), considered.

    Clause 7

    Superannuation Of Persons Employed In Local Government Service, Etc

    9.56 p.m.

    I beg to move Amendment No. 1, in page 8, line 7, after "by" ,insert "additional".

    This is an Amendment to an Amendment which the Government moved in Committee. The Government Amendment had the effect of requiring that increases in pensions made under the Pensions (Increase) Act, 1971, should be paid out of the superannuation funds. The Government introduced the Amendment in response to a request by the local authority associations. The National Association of Local Government Officers was not consulted on this Amendment by the Government, and the association assures me that it had no advance information from the employers' representatives that they would seek this Amendment. We come to consideration of this Amendment afresh in the sense that it is one on which there has been no agreement between one of the principal unions involved and the employers.

    Increases under the Pensions (Increase) Act, 1971, to local government officers are paid not out of superannuation funds but out of the general rate fund. Where an existing local government pensioner receives an increase under the Act the increase is met by the ratepayers of the last local authority which employed him. In the past this may not have been a very serious financial consideration, because previous increases have been infrequent and small. In relation to the total pension fund they have been very small indeed. However, now that annual reviews are taking place and much larger increases are being granted, the amount of money involved is significant in relation to the total of the superannuation funds. I understand that the increases now made may range up to 18 per cent.

    The effect of the Amendment is to ensure that where an increase was made to existing beneficiaries of a supperannua- tion fund under the Pensions (Increase) Act, 1971, this would be made by increased contributions to the superannuation fund by the employers. Unless this is done, it is possible, in the terms in which the Bill stands, that the increase could be paid from past employers' contributions to the fund or, possibly, from interest on those past contributions, thus depleting the fund. I hope it is not the Minister's intention that this should be the case. My understanding of his words in Committee——

    It being Ten o'clock, further consideration of the Bill, as amended, stood adjourned.

    Ordered, That the Superannuation Bill may be proceeded with at this day's Sitting, though opposed, until any hour.—[ Mr. Rossi.]

    Bill, as amended (in the Standing Cominittee), again considered.

    I was saying that my understanding of the Minister's words in Committee was that the employer should reimburse the fund to the extent that the pensions are increased under the 1971 Act. I hope he will be prepared to accept the Amendment so that the wishes of the local government officers may be precisely framed in the Act.

    I am grateful to the hon. Gentleman for explaining the thinking behind his Amendment. I appreciate the anxiety about employers bearing the full cost of pensions increases, but I have looked closely at this Amendment and my advice is that, legally, this Amendment would not make the position any more certain than it is already. Furthermore, to proceed with the Amendment might have unintended and undesirable effects the other way. It might, for example, require the maintenance of a separate contribution related only to pensions increases, and this might point not merely to a separate fund but to many dozens of separate funds. This would stand the whole operation on its head since the starting point is to charge increases to the fund and not to set up special funds.

    The subsection itself provides in paragraph (b) that the employers shall defray the cost of these increases by contributions. I did not leave the matter to rest on the legal phraseology. I added that the employers have already conveyed formally to the employees their intention—that is, the intention of the local authorities—in any event to bear the full cost of such increases. The employers gave this assurance because this could not be precisely nailed in law. The House will realise that the assessment of the cost of the scheme and appropriate contributions at any time calls for work by actuaries who will no doubt make assumptions as to interest rates, prices and so on. These assumptions and conclusions cannot always be wholly borne out by events. But the employers' intention is clear and unequivocal and is on record.

    The exact form of contribution is still to be decided and will be a matter for agreement between the employers before the regulations can be drawn up. Before regulations can be made there will be effective consultation with staff councils. I hope the hon. Gentleman will feel that the purpose of his intention is met and that he will be prepared to withdraw the Amendment.

    Amendment, by leave, withdrawn.

    I beg to move Amendment No. 2, in page 8, line 29, at end insert—

    (d) representatives of the trade unions, in membership of the Trades Union Congress Local Government Working Party on the passing of this Act, with members affected;
    (e) representatives of the trade unions in membership of the Trades Union Congress Local Government Working Party, with members affected.

    It will probably be for the convenience of the House if, with this Amendment, we discuss Amendment No. 4, in page 9, line 16, after "concerned", insert

    'with representatives of trade unions with members in the Scheme',
    Amendment No. 5, in line 16, leave out "likely to be affected by the proposed regulations".

    and Amendment No. 6, in line 18, at end insert
    'who are likely to be affected by the proposed regulations'.

    Amendment No. 2 contains what is probably our most serious criticism of the Bill in respect of the provision which it makes for local government employees. This and the three additional Amendments that we are discussing are addressed to the serious need to guarantee to unions the statutory right of consultation when their pension schemes are being framed or amended by regulations made by the Secretary of State. This matter was raised in Committee, and we had what I thought was a fairly profitable discussion upon it. However, I am disappointed to discover that the Minister has not responded to that discussion by tabling an Amendment giving this right to unions.

    The Bill affects the pensions of very many employees, and the Government's failure to write into it the statutory right for those employees' representatives to be consulted in the framing of regulations implies a most archaic attitude towards industrial relations.

    In drafting these Amendments, no small degree of difficulty has been created by the Government's Industrial Relations Act, since it is no longer possible to rely on what was the past definition of "trade union" as a result of policy difficulties as to whether a union registers under the terms of the Act. I hope that the Government will agree that we have overcome the difficulty in our Amendments by having recourse to the composition of the T.U.C.'s Local Government Working Party. Surely the Government will not refuse any union which is a current member of that working party the statutory right to be consulted if that union's members are to be affected by a scheme covered by the regulations.

    The Amendment also addresses itself to the fact that, because of the problems created by the Industrial Relations Act, the present composition of the working party may not be able to remain the same for an indefinite period. In fact, there are already differences between the unions at present represented on the working party about whether to register and accept the limited protections and the grave restrictions which flow from registration, or not to register and run the risk of grave penalties in order to maintain what are considered to be essential trade union freedoms. Those differences may split the present working party.

    The first part of the Amendment No. 2 deals with the existing membership of the working party. The latter part of it deals with the membership when regulations are made at any time in the future.

    It will be clear that the Amendment is not related exclusively to the matter of consultation, and it will be open to the Minister to consult other unions whose memberships may be affected irrespective of their membership of the working party. The changes in local government and the reform of the Health Service which is taking place may result in members of certain unions who are now in local government service leaving local government service and becoming employees of the Health Service. Assuming that the responsibility of local government for services will not be changed completely, other people who are not local government servants at the moment may be coming into local government service. It is thus necessary, in making provision for consultation with representatives of unions whose members are affected, to have this wide possibility of cover.

    Amendments Nos. 4, 5 and 6 relate to the limited number of people who are affected by local Act schemes. The Government, in drafting the Bill—we do not disagree basically on this point—have taken the view that different consultation rights may be involved. My researches reveal that only a limited number of local authorities have their own local Act schemes. Two of the bigger schemes concern Manchester and the City of London. In both cases, the local Act schemes cover all employees and staff members who are in what are known as the A.P.T. grades—the administrative, professional and technical grades. I do not think that this raises any difficult negotiating problems, provided that the Government accept the principle that the right of unions to represent their members when regulations are being made affecting their pension schemes should be absolute and statutory and not be determined by the Minister at the time.

    However, there is another reason why it is of the gravest importance that members of the T.U.C. Local Government Working Party should have a statutory right to a say in the determination of their pension schemes in so far as they come within the Clause. I refer to the debate which has been going on between trade unions and employers for about eight years concerning contributions already made to the fund. Any new benefits to be provided under the schemes will be based upon and in addition to rights which have been accrued by contributions made by many local government employees and ex-employees over many years.

    Local government officers are extremely worried whether proper appreciation has been made by the Government of the retrospective provisions which will be put in legislation to deal with this problem. The National Association of Local Government Officers contends that its members have for many years been paying contributions in excess of the amount required for existing benefits. Therefore, it takes the view, understandably, that it should have a guaranteed right of consultation in determining future calls upon this fund.

    As evidence of the extra contributions over requirements, I refer to a letter from the Government Actuary's Department to the County Councils Association. The letter, which is headed,
    "Contribution Rates for Local Government Superannuation",
    "Rates of contribution required to provide the present benefits for new entrants to local government superannuation schemes have now been reassessed using the latest available statistics. These contributions include an allowance for the cost of pensions increase, so that they represent the value of all superannuation benefits granted to an employee, not just the benefits paid from the superannuation fund."
    These show that the current cost of providing the benefits which are now available range from 9·9 per cent. in the case of male officers entering at 20 years of age to 11·8 per cent. for officers entering at 50 years of age. For male servants, the contribution rate required to provide present benefits is 6·9 per cent. at age 20, rising to 10·;9 per cent. at age 50.

    10.15 p.m.

    I do not want to weary the House with all the rates. The effect is simply that contributions equivalent to 12 per cent. of an officer's salary have been made to superannuation funds to pay for benefits costing about 1½ per cent. less than the contribution, averaging about 10½ per cent. In the servant categories, for benefits which would cost about 9 per cent. the contribution has been about 10 per cent. There is, therefore, a large sum of money in these funds over and above what is required to meet present benefits, and a decision must be made about how that money is to be used.

    It is indefensible to pass legislation which does not give the representatives of the people who made those contributions a statutory right to be consulted when the issue is being determined. There are a number of ways in which the excess contributions could be dealt with, but the fairest way is to provide for retrospective increases, since many of those who are retired are those who contributed to the building up of the excess of contributions over requirements.

    That is, of course, only one consideration, but it is one rather special reason why the unions representing people employed in local government should have a statutory right to be consulted when a Statutory Instrument affecting their pension funds is being drawn up. It is by no means uncommon for there to be a statutory requirement to consult. In fact, it is fairly common to see in the preamble to a Statutory Instrument a requirement that the Minister should have carried out the consultations required of him by the parent Act.

    I believe the right to consultation to be the minimum necessary for the unions concerned. They are not asking for a guarantee that their representations will even be reflected fairly in the Statutory Instrument. All that they are asking for is a statutory right to be consulted to be written into the Bill.

    I hope that the Minister will accept the Amendment in order to achieve that end. If he cannot accept our Amendment I hope lie will say that an Amendment will be welcome in another place in order to achieve what we have in mind.

    I am grateful to the hon. Gentleman for setting out the purpose of the Amendments. I said in Committee that I would give further consideration to the wider issues raised by a similar point and that I have done.

    As I understand it, the hon. Gentleman is concerned that, as a result of what I might for simplicity call the compulsory consultation Clauses, we have not given the trade unions and staff associations concerned adequate specific recognition and sufficient pride of place. That was the hon. Gentleman's worry in Committee, and he expressed it again tonight.

    I have looked at this with care and in detail. I am more than ever certain that the Government and the Opposition are basically of one mind in the matter of the importance of the position occupied in relation to the Bill and the public service pension schemes by the various staff associations concerned. We share the same objectives in dealing with this matter. Equally, I am convinced that there are practical reasons why one cannot sensibly legislate on this as specifically as the Amendment would suggest. I am also convinced that this matter lends itself more readily and appropriately to a firm statement of intent, which I am ready to give today on behalf of the Government.

    First, let us look at the wording in the Clauses:
    "representatives of … persons likely to be affected … as appear to him to be appropriate."
    This can cover every legitimate representative organisation as well as individuals concerned. I do not think there is any dispute about that. The discretion in the word "appropriate", to which attention was called in Committee and which I know worries the hon. Gentleman, is not sinister or derogatory. It simply enables the Minister to ignore what one might call the "interloper", the unrecognised and unacceptable group that may try to horn in on the discussions and consultations.

    The hon. Gentleman will remember the serious practical difficulty in the way of the Amendments moved in Committee. Any collection of staff, large or small, could form themselves into an association which one could hardly argue was not concerned with the form of the relevant pension scheme, and in this way One would force Ministers in future to hold consultations with breakaway associations, splinter groups and other ad hoc groupings which, in the terms of what would then be the law if we amended the Bill as the hon. Gentleman suggests, could demand equality of treatment.

    I take it that the hon. Gentleman is not seriously suggesting that any union which is a member of the T.U.C.'s Local Government Working Party would fall within the description that he has given of an interloper or ad hoc body. These are bodies which are recognised within the whole of the trade union movement as having a serious and legitimate interest based on the very large number of people in local government service.

    Certainly I do not dispute that. I am suggesting that, over and above all these bodies, it is always possible, as the hon. Gentleman knows, that splinter groups can form and be a grave embarrassment to existing staff organisations. Whatever the hon. Gentleman says, I do not believe that it could possibly be the wish of representative staff interests of the kind he has just described that this kind of development should take place, any more than it is the wish of managements. That is the first reason why, with the best will in the world about the place of recognised staff associations and unions, we believe that to try to push this proposal into legislation would be inimical to staff interests as well as to the management side.

    Secondly, the Government are concerned more with the reality than with the appearance of parity of treatment and will do all they can to ensure that it covers all those who, by mutual agreement, are normally consulted and that it is flexible enough to go beyond this when occasion demands.

    This is rather a good time, with superannuation discussions being current, to measure the range of consultations which appears to be acceptable to both sides at present, all schemes being up for review. I list the employees' representatives and the various ways in which they are formed to be in consultation with the managements of the public services. In the case of the Civil Service, consultation is in progress in the Joint Superannuation Committee of the National Whitley Council. In the case of local government, the employers' representatives are in consultation with the Trades Union Congress Local Government Working Party, which is mentioned in the Amendment. The forum in the case of the teachers is the Working Party on Teachers' Superannuation. Consultations on National Health Service schemes are in full swing in the Joint Superannuation Consultative Committee.

    There is absolutely no risk of the Government under-estimating either these eminent bodies or the important organisations that they represent. However, they are not all standing committees, and they are constituted with varying degrees of formality, which could obviously affect the extent to which they could be legislated for. This illustrates the flexibiliy of approach which we believe to be necessary and which the staff movement itself clearly values as necessary so that it can decide at any one time how best it wants to represent itself.

    Paragraph (d) of Amendment No. 2, far from achieving what I believe the hon. Gentleman wants to achieve, and what the Government certainly want to achieve, would not merely freeze in legislative form the body which is currently serving this purpose excellently from the point of view of staff and management—that is, the Trades Union Congress Local Government Working Party—but would also freeze it as presently constituted. I realise that the hon. Gentleman has added paragraph (e), which would compel the Minister to consult, not merely the working party's membership at the date of the passage of the Bill but its future membership at the relevant time. Therefore, if there were any different membership in between these two we should be in trouble straight away.

    I am not making a frivolous point, because flexibility is needed. In a sense, the very nature of the double-barrelled Amendment recognises that there might be change.

    All this is very cumbersome. If we had to legislate for a full spectrum of likely changes in the way of staff wishing to put forward representations we should be in a frightful mess. So with the changes in Amendments 415–6 which would compel the Secretary of State to consult all unions with members in the local Act scheme concerned. Apart from that, they would compel the Secretary of State to discover the membership of every union involved in the local Act scheme. They would mean consulting literally scores of unions over one Local Act scheme.

    Therefore, I suggest, with the best will in the world, that the best interests of employers and employees are served by continuing the present arrangements as specified in the Bill.

    If it will help, I am very ready to assure the House that it is the Government's intention to continue to consult through the bodies I have described or through any successor bodies which may be set up in agreement with the staff councils and that, as hitherto, this will not preclude our consulting individual associations where this is customary or is a sensible or appropriate thing to do.

    I fully understand that there is a partiscular N.A.L.G.O. worry. My right hon. Friend the Secretary of State for the Environment will ensure in his sphere that an association of N.A.L.G.O.'s obvious importance will always be consulted by whatever means.

    At the risk of tedious repetition, I remind the House of what I said on Second Reading about consultation. I referred to the letter from the Civil Service Staff Side, the essence of which was that the words "to consult" would mean no less than they said. I told the House, I told the Standing Committee, and I say for the third time now, that that is precisely what the Government meant by "consultation". I can tell the House again that this holds good not merely for the Civil Service but for consultations over other public service schemes, including those to which the Amendments relate.

    The hon. Gentleman went on to raise a specific issue to illustrate the case for his Amendment where he thought that consultation was necessary. This would be an area, as would other areas, where the negotiations and the considerations would be conducted under the guarantee which I gave verbally in the House on Second Reading and in Committee, and which I give again now, of consultation. But it is true that the Government would not on this, any more than on any other aspect, be under a legal obligation, clearly defined, to consult specific bodies because, for the reasons I have given, although I am happy to meet the hon. Member's objections, freezing into legislation the staff associations involved would do no service either to the purposes of the Bill or to the staff interests.

    For those reasons, having looked at it again after our good discussion in Committee, I must ask the hon. Member whether he would withdraw these Amendments.

    10.30 p.m.

    No Minister could have been at greater pains than the hon. Gentleman to satisfy us on this important but in many ways small point of difference. We had a good go at the matter in Committee. The Minister has enlarged on the reasons which still lead him to believe that the Government's version of the bodies to be consulted is better than ours. When the principle of consultation is placed as an obligation upon local authority employers for the first time, it is extraordinary that we should appear to be haggling over the definition of who should be consulted. The important concession seems to be lost sight of in subsidiary questions arising from it.

    But this is how things are. I have been in this position many times in negotiations with the Official Side on the Civil Service Whitley Council, and it tends to feel that there is no pleasing us—"You go as far as you can to meet them but they always seem to want something more or something different." I had wondered whether we should not include an additional sub-paragraph specifying "Uncle Tom Cobbley and all" to make it clear that everyone was included.

    It looks pretty comprehensive as it is. I do not know why it should be so difficult to include the word "unions" in this definition when the basis of the whole consultative process is the organised trade union. I mentioned a version of this in Committee—that, years ago, the definition of who should be consulted in the Whitley system was replaced by two organisations defined by name.

    We are getting one lot of advice and the Minister is getting another. Our advice, from a very competent source, should not be unsound. This is a difference of opinion between persons of good will on whether this definition is good enough.

    I do not feel able to accept the Minister's invitation to withdraw the Amendment. To do so would imply that we are convinced that he is right and we are wrong, and that is not our view. There is a way of dealing with this position, and that is the course we shall have to take.

    Amendment negatived.

    Clause 8

    Local Act Schemes

    I beg to move Amendment No. 3, in page 8, line 42, after "up", insert

    "pursuant to section 8(1)(b), above".
    This is an attempt to clarify the precise purpose of the Clause. At a first reading of the Bill it appears that Clause 8 is designed to deal with local Act schemes generally and the winding up of them in particular. But, as the Clause is drafted, it is open to the interpretation that it would enable the Secretary of State to modify regulations made under Clause 7 for the purpose of preserving rights in respect of persons entitled to benefits under any local government superannuation fund which is to be wound up.

    I suggest that the wording of subsection (1)(c) cannot be devoid of that interpretation. Indeed, the provision is drafted in such a way that it must inevitably mean that modifications can be made to regulations made under Clause 7 by the provisions of Clause 8. I am reinforced in this view by the fact that the provisions of Clause 8 (3) relate to modifications of regulations made under Clause 7.

    If it is the Government's intention that when any of the schemes covered by Clause 7 are to be wound up one should revert to the provisions of Clause 8, why is it that the provisions for consultation in Clause 8 are different from those in Clause 7? The logical explanation must be that they deal with a different group of people and a different group of schemes; namely, local government schemes. I put it to the Minister that it is totally illogical to have a difference in representation of this kind for the purpose of winding up a scheme to that which exists for modifying existing schemes covered by Clause 7.

    The Amendment would make it clear that Clause 8(1)(c) cannot be read on its own but must be read in conjunction with subsection (1)(a) and (1)(b). I would like to know why the Clause was drafted in this way, in the light of the criticisms I have made. I hope the Minister will accept the Amendment or at least in- dicate how Clause 8 is so limited as to prevent it from being used for altering the regulations brought in under Clause 7, with the effect of allowing these schemes to be wound up on a narrower basis of consultation than that which the Bill provides for the modifying or creating of schemes.

    I am grateful to the hon. Member for Barrow-in-Furness (Mr. Booth) for explaining the thinking behind the Amendment.

    I spent some time in Committee dealing with the provisions relating to registration officers and medical officers and gave a number of examples, including that of the Museum of London Act, 1965. I said it was essential that such provisions should continue to apply to the local Act schemes. I said that Clause 8(2) empowers the Secretary of State to make regulations reproducing the effect of any such provisions, while Clause 8(3) enables the Secretary of State to extend to the local Act schemes any provisions to be made under Clause 7.

    The hon. Gentleman expressed worries about the way this has been drafted and offers the Amendment. I am advised that the Amendment is not necessary in order to relate the circumstances of winding up which are referred to in subparagraph (c) to the winding up provided for in subparagraph (b). The context of a single subsection embracing both provisions secures that that is so. That is the legal underpinning, if I may put it that way, of what appears in this part of the Bill.

    If the concern is the same as that expressed in Committee by the hon. Member, that the Secretary of State may make regulations under Clause 8(1) without providing—I think this is his worry—for the preservation of existing benefits under Clause 8(1)(c), I will try to meet his worry by giving him four assurances.

    First, if any regulations were made under Clause 8(1), it is certainly the intention of my right hon. Friend that they should provide for the protection of superannuation rights, as envisaged in subsection (1)(c). Second, I am in any event advised that the Clause is so drafted—and this, I think, meets the hon. Gentleman's specific question—that the Secretary of State could not make regulations without taking account of Clause 8(1)(c). Third, as the right hon. Member for Sowerby (Mr. Houghton) remarked in Committee quite rightly, there is always the comfort of compulsory consultation in Clause 8(4). Fourth, and once again, if staff interests were not properly looked after in this respect I certainly would not expect the House to be silent when the regulations were laid as per Clause 12(6).

    I hope that, with those four assurances, the hon. Member will feel that his worries are now laid to rest, and that he will withdraw the Amendment. I am sorry if I sound in a negative mood tonight. But I would ask that the right hon. Gentleman should not give up hope before the night is out.

    With your leave. Mr. Deputy Speaker, and that of the House, may I reply? I am not in a mood to he particularly assured by the provisions of Clause 12(6) because they relate to the negative Statutory Instruments procedure and in another capacity in the House I have had more than one worry arising from the difficulty of effecting any control over legislation by the negative Statutory Instruments procedure.

    The Minister's explanation is truly amazing. If I understand it correctly, it is that the Clause is intended and so drafted as to make provision only for the winding up of Local Act Schemes, and, although it does this by reference to Clause 7 Orders, that does not enable the Secretary of State, by the provisions of Clause 8, to modify the wider rights of the schemes affecting the greater number of people generally covered by Clause 7.

    I can only say that I am prepared to hope that the Minister's legal advice comes closer to the interpretation we subsequently put upon the Act than my understanding of the English in the Bill. On that basis, I beg to ask leave to withdraw the Amendment

    Amendment, by leave, withdrawn.

    Schedule 3

    Provisions Which May Be Included In Certain Regulations

    10.45 p.m.

    I beg to move Amendment No. 8, in page 29, line 8, leave out

    'recoverable or'.
    The Amendment deals with a subject about which we expressed grave worries in Committee, so the Government are not unfamiliar with what inspired it.

    The Amendment would take away from the Secretary of State power to make a regulation to reduce a pension or benefit by an amount calculated by reference to damages recoverable but not recovered. We are not relying on difficult legal interpretations. In any case, I have had the Amendment independently legally examined.

    The cause of concern relates to two problems, and I should like to deal with the lesser first. It concerns the legal definition of recoverable". The officer responsible for administering the regulation might be advised that, say, a local government officer or other employee injured by a third party in the course of his job or in an accident while he was travelling to or from his work was entitled to recover £3.000 by way of compensation. It would he open to the officer administering the regulation to say that that was the amount recoverable although the accident victim might secure only £1,000 in court. There would be no guarantee that that £1,000 would be the amount upon which the reduction of his pension or subsequent benefits was calculated because it would still be arguable that a higher amount was recoverable.

    The graver of the two worries arises from the not uncommon circumstance of somebody who successfully pursues a claim in court not being paid. Often someone wins a substantial award but the person against whom the damages are claimable cannot pay. A case in point was that of a trade union member, a member of an insurance company staff, who died within 24 hours of a road accident, leaving a widow and six-weeksold child. The widow was advised that she could without any difficulty win a claim against the driver of the car that killed her husband. In fact, he went to Durham Gaol and would not have been able to pay a quarter of the sum which would have been awarded against him, and therefore, the case against him was not proceeded with. There are other cases, few up to now, but who can say what will happen when someone wins a claim against a person who is insured but whose insurance company goes bankrupt? We had a recent example.

    Both those instances show that there is no guarantee that the amount recoverable will be the amount recovered. We were assured in Committee that the Minister would never intend that anyone should have his pension rights calculated on the basis of an amount recoverable that was not recovered. If that is so, I can see no reason for including the words that we seek to delete. If it is not the intention to calculate any future pension reduction on the basis of an amount recoverable but it is the intention to calculate it on the amount recovered, surely it would be sensible to take these words out of the Bill. To add to the hardship of failing to obtain damages the additional penalty of a reduced pension is totally wrong.

    We are not here dealing with a small number of people. I have taken the trouble to check with a union which represents a large number of local government officers, and the union is handling about 1,000 claims for damages in a year. A number of people who are, unfortunately, injured in the last few years of their working life may retire prematurely. People in the last few years of their working life are killed and leave dependants. For these people not only to run the risks inherent in legal proceedings for damages but simultaneously to run the risk of having a reduced pension is wrong.

    It is perfectly fair that, where substantial damages are recovered, if the pension scheme is such as to provide insurance rights so that the pension is made up over and above that which is secured in damages, this should properly be written into the scheme. What is unjust and intolerable is that a person or a dependant should not only be deprived of the damages which the court has said should be his, but at the same time, should have his pension reduced by the amount which cannot be secured, and this cannot be the Minister's intention. It may be that the draftsman has not had a proper regard to what was intended. The Government must meet us on this point so that we can be clear about their intention.

    The hon. Member for Barrow-in-Furness (Mr. Booth) has put before us his two worries arising from the inclusion of the words "recoverable or" in the Schedule, and has given us a particular example from which one of his worries springs. My right hon. Friend would not regard moneys as recoverable where patently they were not, but, even so, I see the validity and the tragedy of the case the hon. Gentleman has described, and I accept and understand his worries.

    In Committee the right hon. Member for Sowerby (Mr. Houghton) volunteered to think further about this and made some rather perceptive remarks. I also undertook to think further about it, and I have had the opportunity outside the House to reflect on the matter. As the hon. Member for Barrow-in-Furness knows, I have also had the opportunity to explain the Government's thinking at some length.

    Despite that, I take it that the words of the hon. Gentleman, who has obviously done a lot of hard and patient work and has gone into this deeply, mean that, notwithstanding our reflections and my explanations, there is continuing unease about this problem. We have asked ourselves whether we could manage with the reduced power. Our legal advice is that we should just about be able to get by in meeting immediate needs in the National Health Service, the only place where there is a Schedule 3 scheme of this nature. So, in the circumstances, I accept the Amendment.

    I hope that it does not sound churlish if in so doing, I carefully dissociate myself from some remarks of the hon. Member in Committee about the iniquity of taking powers that it is not intended to use. As I explained on Second Reading, the main purpose of the Bill is to avoid the need for further primary legislation and thus to take wide powers, although with significant and valuable safeguards for the staff interests. That said, I am happy to accept the Amendment.

    Amendment agreed to.

    Motion made and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 56 (Third Reading) and agreed to.

    Bill accordingly read the Third time and passed.



    That Mr. Montgomery be discharged from the Expenditure Committee and that Mr. Tom Normanton be added.—[Mr. Clegg.]


    Motion made, and Question proposed, That this House do now adjourn.—[ Mr. Clegg.]

    Motorway Accidents

    10.56 p.m.

    I greatly appreciate the opportunity of an Adjournment debate about the recent fatal crashes on the M1 in my constituency on 29th November, between Luton and Dunstable. The accident resulted in the appalling total of nine killed and 40 injured of whom at least nine will be permanently disabled. I pay tribute to the magnificent work of the staff of the Luton and Dunstable Hospital, policemen, firemen, ambulance men, voluntary organisations and many of my constituents who rushed from their homes nearby to help the rescue services on that terrible day.

    Miraculously the crash barrier on the central reservation did not break. Newspaper reports say that the Department of the Environment has ordered an inspection of the crash barrier on the M1 in Hertfordshire and an inspection in Bedfordshire would be equally welcome.

    The section of the motorway where the accident occurred is low-lying and, therefore, prone to fog. The fog warning light system on the M1 in Bedfordshire is not adequate. I do not agree with those who say that we should close motorways when fog is about. Motorways are on the whole safer than other roads, and in my constituency if the M1 were closed we should soon have an almost total seize-up of traffic in the Luton-Dunstable area as the existing roads could not cope.

    As a first step we need to bring the warning light system up to the standard of that on the M4 between Chiswick and London Airport. Second, overhead lighting should be introduced on the whole Bedfordshire section and onwards into London. I read that the estimated cost of this would be £15,000 per mile but that when it was installed on the M4 night and bad weather accidents were reduced by about 50 per cent.

    We may have to introduce a winter speed limit of between 50 and 60 m.p.h. on the M1 Bedfordshire section and onward into London. There is nothing particularly startling about this. In America and West Germany similar speed restrictions exist on sections of their motorways which carry a high volume of traffic. We need more police patrols on the southern section of the M1 The mere sight of a police car acts as a magic deterrent to drivers against exceeding the limit.

    I wonder whether the Government are satisfied with the adequacy of rear lights on all types of vehicles. Discussions with manufacturers and a very close look at the American and West German standards could well be of benefit.

    I hope that the Government will keep under constant review the whole question of information on motorway conditions being broadcast on all four national radio networks of the B.B.C., and, of course, local commercial radio will have a part to play in this. In addition, there is room for the improvement of information services at motorway service shops. We should also remember that the wearing of seat belts is compulsory in some countries. Should not we at least make it compulsory when driving on motorways here?

    It is no answer to the problems on the M1 in Bedfordshire and further south simply to say that we should build another motorway. There is no room to do this in Bedfordshire and Hertfordshire without the most serious disruption of town, village and agricultural life. The M1 was built 13 years ago, probably too quickly and too much on the cheap. In passing, perhaps I might point out that we still do not have a third lane between Hemel Hempstead and Watford. We have to make the M1 safer now. This is the time for the Government to spend quickly and lavishly to ensure that this is done


    11.1 p.m.

    I am grateful to the hon. Member for Bedfordshire, South (Mr. Madel) for allowing me a couple of minutes in which to make three points to the Minister. The hon. Gentleman knows that it is not simply the fact that he and I are lifelong friends that has brought me here to support him.

    My first point is that this is a matter of general concern in all the areas through which the M1 and other motorways pass. It is not restricted to Bedfordshire. While there is a fog hazard in the vicinity of Luton, other areas are similarly affected. Looking at the records of road accidents, it becomes clear that the situation is equally serious in a number of areas. There have been serious accidents at Pinxton in Derbyshire and near the service station in Nottinghamshire, again in low-lying areas where fog strikes very quickly.

    Secondly, I refer to the Under-Secretary of State's answers to Questions in the House the other day. I feel that the timing of the change-over to automatic and computerised lights is a little unfortunate in view of the delays. This is just the time of the year when the fog warning light system needs to be as efficient as possible. I use the M1 frequently and it is not my experience that the lights are adequate.

    Thirdly, although I agree with the hon. Gentleman that we cannot close motorways in fog, I think that we should ask the Minister to recommend to the police the restriction of lane traffic in conditions of fog. If traffic is restricted to the two inner carriageways only, emergency traffic in the shape of ambulances, police cars and so on can use the outer lane in the event of an accident. Having been involved in one of these appalling pileups, it is my experience that what causes the greatest difficulty in getting out the injured is that rescue and police vehicles cannot get through to them.

    A directive to the police along these lines would act as a restriction on the speed of vehicles using the motorways besides helping to get the police and ambulance vehicles to the injured in the minimum time. Of course, that will not be practicable on the stretch of motorway through the hon. Gentleman's constituency. It is one stretch which I consider to be profoundly dangerous. The construction of a third carriageway roughly between the A5 and the A41 coming into London should be treated as a matter of priority because of the increasing danger resulting from the heavy use of the road in that area.

    11.4 p.m.

    I. too, am grateful to my hon. Friend the Member for Bedfordshire, South (Mr. Madel) for giving us an opportunity to take part in the debate. Hon. Members will know that I tried to get a debate on the subject a week ago. Unfortunately, time prevented it.

    I want to draw attention to several of the matters which have been touched upon already and, in addition, to raise one or two other possible safety factors. I am certain that the safety barrier down the M1 has been a great success. I am pleased that it proved so efficient in the crashes which have been referred to but, equally, I urge that it be examined with a view to seeing how much more efficient it can be made at other points.

    I refer also to the computer-controlled automatic signals which we need so badly. It cannot be considerations of cost which are stopping their installation. In the crash which occurred about three weeks ago the diversions which were necessary following it must have cost the country thousands, if not millions, of £s in terms of wasted time alone.

    Another factor is vehicular fitness. This is a matter of individual care but I think that we need to get tough with garages to encourage a universal standard throughout the country. There are insufficient skilled mechanics. Perhaps the Minister will see what can be done to encourage the training of more mechanics.

    One thing which scared me on my first venture on a motorway was when I ran over a piece of metal debris on the road. It is frightening to see such debris about. I am also concerned when I pass what appear to me to be patently unsafe loads. They can be extremely dangerous. However, there is no doubt that fog is the worst enemy. When one is, so to speak, leading the field in foggy conditions and gets that isolated feeling, with pressure building up behind, anything helps.

    I pay tribute to my hon. Friend the Member for Bedfordshire, South for what he has said. I agree that general lighting needs to be brought in to give a sense of direction, of speed and other factors. Is it possible for a method to be devised for reflecting an indication of speed on to the windscreen of a car? This is done in aircraft. A driver's glance at his speedometer might be his last. It is a sobering thought.

    In fog the careful driver often turns out to be the dangerous driver because he is, so to speak, the oncoming vehicle to someone approaching what, from the rear, look like two cigarette ends. We need much better rear lighting on the vehicles. American cars have very unattractive rears but they are life-savers. I hope that we can do something to persuade English manufacturers to follow the American example.

    The statutory application of a safe Teed limit in fog is absolutely necessary. I support what the hon. Member for Derby, North (Mr. Whitehead) said about segregated lanes. It is a good idea to keep two lanes only in operation.

    What concerns me more than anything is the need to do something about the point of impact in those few fatal seconds after a crash has occurred. That is the most important time. No amount of computerised signalling can help. It has to be something instantly set off by the crash itself. I think that we might look to the electronics industry for a cheap warning system which emits a signal between cars at the danger point.

    Good Samaritans are often killed on motorways when they go to help because there are no signals to warn anyone that a crash has occurred. Good Samaritans are being killed because they are being Good Samaritans. I urge the Minister to do what he can to save our lives. It is our lives we are talking about, because such accidents could happen to any of us.

    11.9 a.m.

    We have, at this late hour, had a mini-debate on a major subject. I congratulate my hon. Friend the Member for Bedfordshire, South (Mr. Made]) on inaugurating it.

    We have all come to the House tonight with our minds full of the horrific pictures in the newspapers of the recent tragic accident on the M.1. I do not propose tonight to dwell on the details of particular accidents, other than to express my personal sympathy and, I am sure, that of the House as a whole for the victims and their relatives.

    The police are still going about their melancholy but necessary task of trying to establish what really happened, and whether the remedies of the law, such as they are, should be applied. I understand that 84 notices of intended prosecution have already been issued in respect of the Bedfordshire accident and another 31 such notices in respect of the Nottinghamshire accident. It is not for me at this stage to comment on the causes of these tragedies, nor to try to lay the blame on any one class of driver. Indeed, the more I study these accidents the more convinced I am that no single class of driver is particularly to blame.

    But I should like to say something on the generality of motorway fog accidents. One thing that I should make clear at the outset is that the Government share to the full the strong public concern, and that is why my right hon. Friend and I called a special meeting last Friday of representatives of the whole spectrum of motorway users and the police. At this useful meeting I was particularly impressed by the way in which all the various interests represented were ready to pool their experience in a constructive way so that we could take new steps to reduce these hazards if possible.

    The meeting was held against a background of headlines speaking of motorway madness, and yet the fact of the matter, as my hon. Friend rightly said, is that the motorways are by far our safest roads. Moreover, and I stress this, fog accidents represent only about 3 per cent. of all the accidents that there are on the motorways, and, therefore, in considering what can be done. I think the House must retain a sense of perspective. Road safety, like everything else, is a question of resources. We have to judge not only the effectiveness but the cost of the measures we use to improve safety.

    Many people have asked, in the Press and elsewhere, what the Government are doing to prevent motorway accidents. That is not, in my judgment, the most important question. The key question is: what are the drivers doing to prevent a recurrence? But the Government, quite clearly, have a major responsibility, and I assure the House that a great deal has been, is being, and is going to be done in the short term as well as the long term.

    Perhaps I can identify the four main elements in the problem—the road, the vehicle, the management of traffic and, most important, driver behaviour. I start with the road. We are introducing as fast as we can what all hon. Members tonight have suggested; namely, the new and highly sophisticated automatic motorway speed signals. These are designed to help not only in fog but at all times of danger—for example, when a lane ahead is closed because of roadworks or because of an accident. We have not been able to introduce these new signals as fast as many people would have liked. There have been a number of technical difficulties, but I hope that by the end of this year about 80 miles of the most vulnerable motorway will be covered by such signals and that by the middle of next year about 400 miles will be covered, including much of our busiest motorway mileage, and, in particular, the southern end of the M1, though I regret to say that this will not be the whole of the length in my hon. Friend's constituency. The rest will follow as quickly as possible.

    But I must tell the House that it is only in urban or semi-urban areas that we can justify the high cost and the environmental damage of the gantries like those at the London end of the M4. Safety is vital, but I ask the House to remember that there are environmental considerations to be taken into account as well. I assure the House that the normal type of automatic signals mounted on the reserve and able to show speed limits and lane closures have been designed specifically for the main motorway network, and they are entirely adequate for it, assuming that drivers will follow the advice that is so clearly provided.

    We are making good progress with the installation of crash barriers on more than 1.000 miles of motorway, and the site of the recent tragic accidents in Bedfordshire, as my hon. Friend rightly said, proved that the barriers, where they were installed, did the job, and did it well.

    Hon. Members have referred to the reports in a Sunday newspaper about faulty installation of barriers on the M1. These are most serious allegations, and my right hon. Friend is asking the county surveyor, as the engineer to the contract in the area, to look into them very carefully, but I can reassure the House that, judging by the way these same barriers have successfully withstood impacts already, we believe them to be effective and unlikely to give rise to the danger of whiplash, as suggested in the newspaper.

    I have talked already of signals and of crash barriers, but we are carefully examining whether there are any further physical measures that we can take to help; for example, installing more reflective studs on the fog-prone stretches of motorway. This is a simple point, but I believe this might be a great help to the driver trying to place or orient himself in fog.

    We are looking urgently into the possibility of lighting fog-prone stretches of motorway. Much more is involved here than the question of fog accidents, tragic as they are, because we have to remember that there is a much greater number of night time accidents when there is no fog. Lighting is now being installed on considerable lengths of the M62 over the Pennines, which, of course, has a great deal of fog, and we shall be studying experience there carefully in order to apply it and the information it yields elsewhere where it is needed.

    I turn now from the road to the vehicle. Here also there is room for improvement. My hon. Friend the Member for Birmingham, Perry Barr (Mr. Kinsey) in a striking phrase referred to rear lights looking like a pair of cigarette ends. That expresses very well the problem where lights are inadequately cleaned. I remind him that since 1964 all obligatory red rear lamps have had to comply with the highest British Standard Specification and drivers may also now fit special high intensity rear fog lamps if they wish. It may be that many who drive on motorways will choose to do so.

    My right hon. Friend is seeking powers to require the daytime use of lights in poor visibility, and already heavy goods vehicles are required to bear special reflective rear markings, and I think this may have helped.

    Following our meetings with users' organisations last week, my right hon. Friend and I will be reviewing all vehicle lighting to see whether there is any more that can or should be done by way of regions. But, here again, I believe that regions are not the whole story. It really is up to the driver to check that all his car lights are working every time he goes on a motorway, and especially in wintry and foggy weather.

    A recent survey showed that one vehicle in eight has defective lights, that is to say, more than 12 per cent. It really is up to the motorist to keep his lights clean. Up to half their power can be lost through dirt and filth covering them. My hon. Friend made a good point when he suggested that better facilities at some of the service areas might help drivers to keep their lights clean.

    We have also been looking to the future. The Road Research Laboratory has made good progress with a device to enable a vehicle's speed on the speedometer to be seen ahead of the driver through the windscreen. That is the point my hon. Friend made. Already a prototype is being tested. A new system of radio-transmitted verbal warnings is also under study. Yet another device, a station-keeping indicator, to tell drivers by a visible optical-focussing arrangement when they are getting too close to the vehicle ahead of them, is being developed. The radio-transmitted verbal warnings are showing promise.

    My hon. Friend suggested that it should be made compulsory to wear one's seat belt on motorways. I understand why he suggests that because there is no doubt that wearing a seat belt saves life, but after much reflection I prefer persuasion to compulsion. Recently in a special campaign on seat belts in the North-East we were able to achieve a substantial improvement in the number of people voluntarily adopting this elementary precaution, and we intend to keep up our efforts. The seat belt is unquestionably the biggest life-saver available.

    Thirdly, there is the problem of controlling traffic. Many hon. Members from time to time have urged that we should do more by traffic regulation to make the motorway safer in fog, and the public, to their credit, have in recent weeks and months sent in hundreds of ideas to my Department. We welcome suggestions; we are always glad to look at them. Many have suggested making separation distances mandatory or that we should make new advisory speed limits compulsory. My hon. Friend has sug- gested that there should be a 50 m.p.h. speed limit on the M1 in winter, but I do not think this is a problem for the law. The difficulty of enforcement of any of these measures would be immense, and I am not sure that it would not be tackling the problem from the wrong end. We may have to fall back on more use of the law, but what we are after is better behaviour and not more prosecutions.

    Other people, including I think the hon. and learned Member for Northampton (Mr. Paget), the other day suggested mounting cameras on bridges. There are practical problems about using them as an aid to enforcement but we are examining the idea and will be making the first practical test next week.

    Others have suggested segregating traffic into separate lanes in fog. I took note of the suggestion of the hon. Member for Derby, North (Mr. Whitehead). This, too, raises questions of enforcement and definition, but it is an interesting suggestion and one which my right hon. Friend will consider carefully.

    A more drastic suggestion is the one to close motorways, but all who have spoken tonight have agreed that the net result would be to create more, and not fewer, difficulties.

    The West Riding police have introduced an intensive patrolling system, especially in fog, which has operated with great success despite the heavy demands it imposes on police manpower. Perhaps the House would join me in a tribute to the sterling work of the police on the motorways and would accept the comment of the hon. Member who suggested that the police might need more resources if they were to do this task adequately. I shall be pleased to pass that suggestion on to the Home Secretary.

    I should also like to pay a brief tribute to the B.B.C., whose radio warnings are already most helpful to people intending to drive on motorways. I shall be meeting the B.B.C. with the police and the motoring organisations shortly to see whether there are further ways in which radio bulletins can be helpful in giving warnings in had weather conditions.

    Finally, there is driver behaviour. I have mentioned some of the mechanical efforts being made by the Government, but all such measures are secondary to what the ordinary driver is prepared to do.

    Anyone who takes the wheel of a car assumes a fearful responsibility for himself, his family, and hundreds of unknown strangers, and no one, least of all this House, should try to remove any responsibility from the ordinary driver. There are many aspects of driver behaviour in fog—fear, the sense of isolation, and the lack of reference points on either side—but by common sense and giving an extra margin of safety, the ordinary motorist is perfectly capable of overcoming these psychological inhibitions which can arise in fog. That is the heart of the matter.

    No matter how many safety devices we may build into our vehicles or on our highways, the roads in the end are as safe or as dangerous as those who drive on them make them. The Government are doing, and will continue to do, their full part in improving the condition of the motorways and in providing anti-fog warnings. But it is to the driver—the citizen—that we must look for the major contribution towards saving life and limb.

    I therefore ask my hon. Friends to convey to their constituents who drive on the M1 these simple points of advice. First, on motorways the driver should drive within his limits—within the limits of the road, the weather, the vehicle, the traffic and, above all, his reaction time. Secondly, people should fasten their safety belts. Thirdly, they should keep a safe distance. Fourthly, they should keep down speed, for there is no doubt that excessive speed on the roads is an executioner more fearsome than many a modern war. Finally, having assessed the safe limits of speed, distance, weather conditions and the characteristics of the road and traffic, all drivers on motorways should give themselves an extra margin of safety, because it is that extra margin which, more often than not, can make all the difference between survival and suicide.

    My hon. Friend the Member for Bedfordshire, South has done a service to his constituents, to the House and to the country by raising a matter which concerns all of us as citizens and drivers. If we can give a lead and wise advice to motorists, and if we can set an example, we may make a beginning on reducing a toll on the road which is as unnecessary as it is fearsome.

    Question put and agreed to.

    Adjourned accordingly at twenty-six minutes past Eleven o'clock.