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Steel Industry (Wales)

Volume 892: debated on Wednesday 14 May 1975

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11.1 p.m.

I am glad to have the opportunity of this adjournment debate on the prospects for the steel industry in Wales. It can be said, without question, that those prospects are bleak at present.

It is my contention that there should have been a full debate on the steel industry in the House, for the situation in the country in this vital industry is tragic, particularly in Wales, where it is the biggest employer of labour. The industry is also an important part of the economy in Scotland. The livelihoods of many thousands of families are involved and whole communities are at stake. I therefore feel that a full-scale debate should have been given the highest priority, for neglect of this kind leads to the call for separatism in respect of Wales and Scotland, as the Member for Carmarthen (Mr. Evans) would be only too pleased to agree.

There are 64,000 people employed in the steel industry of Wales, and in the 10-year modernisation plan announced during the term of office of the last Government three major plants in Wales were to be adversely affected.

The Labour Party promised in its election manifestos of February and October last year that it would reconsider those closure proposals. In the event, the decision over East Moors, Cardiff, has been postponed for five years, until 1980. A decision on the future of Shotton has not been reached. In respect of Ebbw Vale, the decision was confirmed that steel making there was to end. For the people of Ebbw Vale and those employed in the steel works, there has been much heart searching and it is very tragic for them.

Now, in addition to, and superimposed on, that decision to cut steel making, we have a major recession in the economy which particularly affects the steel industry.

The Chairman of the British Steel Corporation has now proposed, in addition to his earlier proposals, to lay off over 9,000 people in the Welsh steel industry. The consequences of such a proposal would certainly be disastrous not only for the steel industry but for industries serving it and for distributive and service sectors. Whole communities could be left derelict. The trade unions have flatly rejected those proposals by Sir Monty Finniston. Perhaps the unions would do well to press for short-time working rather than redundancies. Half a loaf is better than no bread. There could be complications over the guaranteed week which previously operated in the industry.

The community in Ebbw Vale, which is facing a terrible situation, recently had the advice of the Leader of the Liberal Party, who emphasised the remarkable redundancy payments they would get under Common Market rules if they lost their jobs. I do not know how experienced the right hon. Gentleman is in the affairs of the steel industry, but the people of Ebbw Vale and of Wales as a whole want work, not redundancy payments. It is wrong to stress redundancy payments when these people want the dignity of secure employment.

The steel industry is subject to violent fluctuations of demand. The BSC could be accused of hasty judgments over closures. For instance, it closed the former Stewarts and Lloyds tube works in my constituency, with the loss of 1,500 jobs. We now import the very product that the works produced, with evil effects on our precarious balance of payments.

After I wrote to Lord Beswick on this matter, in a letter dated 9th May he replied:
"As far as tubes are concerned, the Corporation has run into a number of production problems at Clydesdale, where output of seamless steel is concentrated."
It was those production problems that the action committee at Stewarts and Lloyds works in Newport stressed when it protested against the closure decision. It said that this had been a long and consistent problem at that works in Scotland. It put this fact before the Select Committee on Nationalised Industries both in the House and when it visited Newport. This was therefore a case of hasty judgment by the corporation.

Some weeks ago the commercial director of the corporation Mr. Hawksley, pointed out that for every ton of steel exported to the Continent, 17 tons were imported, Germany being the main beneficiary of this trade. It had been known that this would happen if we joined the EEC, and now the cat is out of the bag—

Does the hon. Member agree that if we were to join EFTA on coming out of the EEC all these regulations would remain exactly the same? If there was a "No" vote, would the hon. Member be against an EFTA-type agreement?

These documents were drawn up by the staff of the BSC in 1971 before we entered the Common Market, so the situation did not arise at that time. The first was entitled "The British Steel Corporation and the Common Market", the second "The Effects on the Direct Steel Trade of UK Entry", and the third "The Effects on the Indirect Steel Trade of U.K. Entry". They revealed that our steel industry, which had just begun to modernise after years of neglect by the old steelmasters, would lose its markets to continental steel makers. This prediction has been shown to be accurate. We now import no less than 3 million tons annually from the Continent. It has been suggested that if those 3 million tons were made in this country we should require 30,000 more people in the industry, not 20,000 fewer, as the Chairman of the BSC is now proposing.

Does my hon. Friend agree that it is a matter not of 3 million tons coming in but of a 3 million tons net deficit of imports over exports.

I accept that correction. These figures bring home to ordinary steel workers and their families what Common Market membership means to them. It is their jobs and livelihoods which are at stake. The documents revealed that with entry the BSC would be forced to concentrate its plants on the East Coast. It is this policy which is now forcing the closure of our Welsh steel works in Ebbw Vale. Shotton and East Moors. That applies to works elsewhere in the country, too. EEC membership is the road to ruin for the Welsh steel workers and their families, and for whole communities in the Principality.

I suggest that the documents must be published. The people should be told the truth so that they can judge accordingly. The veil should be lifted from these documents which have previously been kept secret. My right hon. Friend the Secretary of State for Industry has been quite straight over these issues. He pointed out in Barnsley last Saturday, for instance, that control of the publicly-owned steel industry is passing to Europe. Is that what the British people want? I very much doubt whether that is their wish.

Article 58 of the Treaty of Paris reads:
"if a situation of manifest crisis is declared when there is a decline in demand the Community is empowered to order a cutback in production."
Last week the French Government apparently asked the Community to accept that there was such a crisis, but the request was refused. The suggestion has been made that that was because of the referendum in Britain. I appreciate that information of that kind is embarrassing at the moment to supporters of the Common Market.

It is further alleged by my hon. Friend the Member for Liverpool, Walton (Mr. Heffer), the former Minister of State, Department of Industry, that the Commissioners were having secret talks, as he put it, with certain pro-Market Ministers to hush up the details and to avoid any redundancies in our Welsh steel industry and elsewhere until the United Kingdom is safely tucked inside the Common Market. That has been denied, but the fact is that the information that my hon. Friend has divulged is from the Agence Europe. It will suffice to say that there is something very fishy about the whole business.

Then there is all this business about Sir Montague Finniston. His flights of fancy have spread despondency and alarm throughout the industry. A few weeks ago he alleged that he was misquoted over some statement about the possibility of selling off certain parts of the publicly owned steel industry to private concerns. But a fortnight ago we had that remarkable statement envisaging that the British Steel Corporation's part of the steel industry would have its manpower reduced from 220,000 to 50,000. That might be said to be "At-a-stroke" Government.

Of course, our situation is different from that which prevails in Japan. I understand that in Japan there is casual contract labour in addition to the normal regular work force. Further, when young lads start in the steel industry in Japan at the age of 16 they are guaranteed a job for life.

I protested about Sir Montague Finniston's statement to the Secretary of State for Industry, and on 12th May my right hon. Friend replied to me:
"I was most concerned both about the content of the statements and the manner in which they were made …".
That goes, too, for many thousands of steel workers and their families.

That brings into question the whole relationship between the Government and our nationalised industries. I recall what happened when the Conservatives came to power in 1970. Soon, there was disagreement over policy with Lord Hall, the head of the Post Office, and he was out. But Sir Monty Finneston has acted far more irresponsibly. All he had was a questionnaire from the Secretary of State for Industry. The Chairman of the BSC needs to be reminded of the 20-year argument over the public ownership of our steel industry. He is running a publicly-owned industry, not a private company. Ultimately, the Government are responsible for it through the House.

My hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) has tabled Early-Day Motion No. 468 on the subject of the steel industry. My hon. Friend has considerable experience in the management of private industry. The original steel project of the Macmillan Government, instead of being sited on one site, was split between Ravenscraig in Motherwell and the Spencer works in Newport, so my hon. Friend and I have a kinship in that respect.

In that motion my hon. Friend states that under the Iron and Steel Act 1967 the BSC should show concern for all its employees—the 220,000 present employees not the 50,000 to which they may be reduced at some future date. He wants the industry to be able to engage in any industrial or commercial activity inside or outside the steel industry. He points to the acute management problems of the BSC and states that industrial relations have deteriorated. I can certainly vouch for that in my area. My hon. Friend states that staff development policies are inadequate and that steel workers and managers are demoralised. He says that major operating mishaps in plants occur with unjustifiable frequency and that the failure of strategy is manifest at the highest level. I can confirm this from my experience at Newport. There is much more besides.

The gentleman who runs this industry has been given a knighthood for this squalid display of inefficiency. I attended the annual meeting last weekend of the Welsh Regional Council of Labour at Llandudno. At that meeting it was accepted that a new chairman should be appointed without further delay. That is also the view of the Welsh TUC. There will be no tears in the steel industry if Sir Monty Finneston resigns.

It will not be an easy job to put the BSC back on its feet. It needs a man of ability at its head with a belief in public ownership. It needs, too, worker participation in the proper sense, not the present sham arrangement of "Finneston's poodles". The Government must face the fact that this nationalised industry has not come up to expectations in respect of management, accountability, efficiency or industrial relations. Serious thought needs to be given to this matter because the steel industry is vital to the Welsh economy.

11.25 p.m.

I welcome the opportunity offered by my hon. Friend the Member for Newport (Mr. Hughes) to debate the serious and important issues facing the Welsh steel industry.

I begin with the proposals for expansion at two Welsh sites within the five major sites selected under the strategy for main development. These are the proposals for expansion at Port Talbot and Llanwern, which would increase their steel-making capacity from about 8 million tons to about 10 million tons. Investment in Wales would amount to £900 million out of the total estimated cost of the programme of £3,000 million at 1972 prices.

The expansion at Llanwern from 2 million tons to about 3·8 million tons a year is almost complete, and new coke ovens and coke handling plant are to be built at Port Talbot. Proposals for further major expansion at Port Talbot are being considered under the procedures established for the appraisal of major investment projects.

Investment in finishing facilities in Wales includes £40 million for development of tinplate facilities at Ebbw Vale, and the British Steel Corporation plans to proceed with a further stage costing £8 million. At Shotton a cold production mill has been started, and work has begun on a £30 million coating complex.

The corporation's strategy proposed the complete closure of the East Moors works, of iron and steel making and hot rolling at Ebbw Vale, and Shotton. This meant a threatened loss of over 15,000 jobs in those three works alone. In the case of Ebbw Vale, 320 employees were affected by the closure of one blast furnace in April, and the corporation has told the Government that no one who wanted alternative employment left the works without it. About 700 are likely to be displaced by closure of the second blast furnace and the BOS shop in July. These figures do not take account of 350 expected retirements. Everything possible is being done to attract alternative employment for these persons, but it is not possible at this stage to see jobs being provided for them all.

In the case of East Moors, the deferment of the closure means that the new jobs currently in prospect will arise too early to provide alternative employment. But at least we have more time to attract additional new projects. Cardiff has a number of advantages as a location for industry and was granted development area status last August. There is, therefore, reason to hope that we shall be able to secure sufficient new jobs to replace the 4,600 to be lost in steel.

In the case of Shotton, in addition to the deferment of the closure date it was concluded in the interim report that further study was needed of the economics of modernised steel-making at Shotton and of its implications for the corporation's proposals elsewhere. This study is in progress, and it is hoped that it will be completed within a few weeks. Work is going ahead on the development of new finishing plant which will provide 500 jobs.

As my hon. Friend initiated the debate. I should refer to the problem at Alpha Steel Ltd. at Newport. I make no secret of the fact that when the plans became known the Government regretted the loss of powers to control investment in the steel industry because of fears about the effect it would have on scrap supplies for the BSC. These powers were possessed before our accession to the EEC. My hon. Friend was active in supporting the project, and I am sure that the provision of employment—800 jobs are involved—will be welcomed in the area.

This, then, is the pattern of the industry for the longer term. However, it is now faced with problems in the short term as a result of the current recession. There has been a sharp fall in demand for steel, which has affected both the corporation's level of production and its cash flow. Under legislation before the House—the Statutory Corporations (Financial Provisions) Bill—the Government are seeking to increase the corporation's borowing limit by £750 million. This should enable the corporation to deal with the cash flow situation and maintain the momentum of the capital investment programme. The corporation's most recent forecasts indicate that demand in the immediate future is likely to be equivalent to only about 70 per cent. of plant capability, but the fall in demand for some products is much more serious and the strip mills division, mainly located in Wales, has been particularly hard hit. It is reported to be losing about £2½ million a week.

In order to meet these problems, the corporation is trying by all possible means to maximise sales. It is increasing its own stocks and has put to the Government proposals for a counter-cyclical stockbuilding programme. We are sympathetic to this, but are still awaiting a reply from the corporation on the jobs that would be saved by the programme. It is concentrating production also on low-cost plants and has put to the TUC steel committee proposals which would result in a reduction in employment of between 16,500 and 17,000 this year. The steel committee rejected this proposal and is considering the situation in preparation for a further meeting between it and the corporation which will take place on 19th May.

My hon. Friend will be aware of the situation surrounding the issue in the light of the publicity attending certain statements. I take this opportunity to say that the Government regret the statements made recently by Sir Monty Finniston and the manner in which they were made, which have caused great anxiety in the steel industry and in the communities in which the corporation's works are situated.

The Question having been proposed after Ten o'clock and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at twenty-nine minutes to Twelve o'clock.