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Steel Industry

Volume 404: debated on Tuesday 6 May 2003

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Motion made, and Question proposed, That the sitting be now adjourned.— [Jim Fitzpatrick.]

9.30 am

I welcome the opportunity to open the debate. I asked for the debate a week ago today, on the day that the Corus Group held its annual general meeting at which it endorsed a new chair, Mr. Leng, and a new chief executive, Mr. Philippe Varin, and announced a restructuring and recovery plan that sheds hundreds more steel jobs around the country. Corus is the successor to British Steel. It covers the core steelmaking business in this country, which in turn serves our manufacturing capacity, and is the basis of our industrial reputation in this country and abroad.

A partnership approach with government at national and regional level is not an option to undertake as the mood of the chairman and the chief executive takes them; it is what the Government must demand. The bombshell announcement last Tuesday was so poor that the families of workers at Stocksbridge in my constituency woke to hear on the radio—as I did—that their jobs were to go and the works were to be closed ask the Government to intervene to demand a say and to ensure that every aspect of the package put forward by Corus last week is subjected to close and independent scrutiny. The implications for the UK's industrial reputation are such that the Government have a duty to intervene. The issue is not just about Corus, its management or the individuals and factors at the top of the organisation; it touches on almost every aspect of the economy.

The Government should work to ensure that external international factors, such as tariffs, the dumping of cheap products, and fluctuating exchange rates, are not a threat to the industry. That is partly why, with the support of my colleagues who are present—I am grateful for their attendance—and that of the trade unions and the UK Steel Association, an all-party steel group was established a couple of years ago to give the industry a more high-profile parliamentary focus and to enable it to work more closely with the Government. We have worked well over US steel tariffs. We have a role—we have worked on that—to press in Europe for measures against dumping and the influx of cheap products.

The all-party group also recognises that, for the steel industry, fluctuating exchange rates in Europe have been detrimental to investment planning, which they have left uncertain, and have sometimes left us at a disadvantage with European competitors. The stability which membership of the euro—at the right exchange rate—would bring is unquestioned. It is interesting that, since the group was formed two years ago, the former chair of the Corus Group has not once made any attempt to make contact with me, as chair, or with parliamentary colleagues.

I ask the Government to maintain and extend investment in research and development in the industry in conjunction with higher education and regional bodies, and to build on new moves in metal skills training which are essential to create the flexibility that the industry needs to grasp new opportunities in the market. Although the leadership and structure of this crucial industry has been muddled and has failed, steelmaking in the regions has continued and will continue. There are new markets and capacity for a competitive and versatile steel business. New developments demand flexibility, skills, expertise and, of course, a competitive environment, investment and high productivity. We have taken those measures in the UK and have a competitive industry, which excels in world markets.

I agree wholeheartedly with the trade unions that those characteristics and skills exist across the country in both management and the work force. The leadership has let down not only them but all of us in the country. I know that other hon. Members will focus on their particular areas, but I want to concentrate on south Yorkshire, which is the home of engineering steel production. We know that the production method involves an electric arc furnace and uses scrap metal as its primary source. I suspect that it is the only heavy industry in the country that has a totally recyclable product, and it is therefore environmentally important.

We also know that Sheffield's industry goes back to the days of crucible steelmaking in which people found new functions for a brittle, hard metal substance by using its flexibility and durability, which gave our manufacturing industry the edge across the world in the past century. In recent years, that expertise has been developed under the Labour Government. In south Yorkshire, there is a partnership, in which Corus is involved, between the aerospace industry, the Boeing company, the Government and the region. It has led to the development of the Advanced Manufacturing Research Centre, and the Minister was welcomed in south Yorkshire when he opened it.

Those links with the aerospace industry are fundamental to a package of new initiatives, which are linked with higher and further education in the region, building on the links between engineering steel and new industries. For example, the Welding Institute has relocated to Sheffield from Cambridge and the head office of Castings is in the area. The production of new medical instruments is centred on our Medipark, where 140 companies are located. The energy, wind technology and diesel technology industries all need new specialist products made from engineering steel produced in south Yorkshire.

The debate concerns not only the steel industry but all the products that flow from it. The value-added end of production in the steel industry has led the industry into new profitable markets, and a small town in my constituency called Stocksbridge lies at the top of the value-added chain. It has about 15,000 inhabitants and is the home of special engineering steel. An early pioneer, Samuel Fox, founded the town's works, which he made profitable because he knew how to make steel bend. He introduced steel into women's corsets and crinolines and the works went on to be the main producer of the high-tensile steel used in umbrellas. Now, Stocksbridge produces the unique, strong, high-tensile steel used in landing gear on aeroplanes. Every time we land and wonder why the aeroplane does not crash as its weight bounces along the runway, we can be thankful for the expertise of people in a small town in my constituency, which produces that grade of metal. Stocksbridge is a small town and almost everybody in it knows somebody who has worked in the steelworks. There is a pride in the product, which runs through not only the work force but the whole town.

Production comes from a re-melt facility, which takes the core engineering steel and re-melts it through a finishing and processing plant. The ingots made and melted at Stocksbridge are used to develop the product, which is unique in the United Kingdom. The plant is a world leader for quality and competitiveness and accounts for 80 per cent. of the total UK export of special engineering steel. Profit from one chunk or billet of aerospace steel is more than 10 times the profit from one chunk or billet of engineering steel. For years, that has provided the icing on the cake in terms of profits and has carried engineering steel through the ups and downs of the market.

So it is no wonder that the closure of the Stocksbridge plant last Tuesday morning was greeted with shock and bewilderment. For people in Stocksbridge, the decision is simply wrong. However, historical roots do not themselves make a business case. I must acknowledge, and thank Corus for, the detailed briefing that it gave us last Friday. Corus Engineering Steels proposes, first, to restructure in Rotherham so that steel making and the melting facilities are all on one site; and, secondly, to invest in a new ingot furnace in Rotherham, closing the melt shop and hot rolling mill at Stocksbridge so that all the primary material for the re-melt facility will come from Rotherham, while special steel processing remains at Stocksbridge. That was not what came across at 7 o'clock last Tuesday morning; it has emerged since.

I recognise that the presentation from Corus Engineering Steels focused not only on cuts but on investment to the tune of £250 million, but it left so many questions unanswered that I have to conclude that the plan is a fix—a crisis response to Corus's serious financing problem, rather than a thought-through industrial strategy. The motivation and drive behind last Tuesday's decision is, in my view, crucial to the plan's potential and viability. Is the aim simply to take out costs to meet a short-term financing crisis, or is this a real strategy for the future?

If the restructuring is profitable and right for south Yorkshire now, why has it not been put forward before? It is crucial for south Yorkshire that the plan should in no way threaten the viability of the profitable core of the business—the aerospace and reprocessing sectors, the added—value product and the output at Stocksbridge. That is like a jewel at the centre of a Russian doll. On the survival and profitability of that plant rests the health of not only steel but UK manufacturing, as I have explained, and the bulk of our exports.

Is the Corus plan playing to its strengths? Where is the vision to expand secondary special steel reprocessing to move into new markets? Should a company locate its strongest product in the derelict and devastated atmosphere of a wider plant that has closed down and been mothballed? If the ingot production of special steels at Stocksbridge needs upgrading, why not upgrade it with a new furnace at that site? We would have more confidence in the proposals if Corus had worked through them with us at Government or regional level and with the local community during the past weeks and months, as the region has received its bids and developed its strategy for European objective 1 funding.

What efforts has Corus made during those months to win backing for its investment at Corus board level? How does its plan fit into the overall package put to the board last Tuesday? We were told that the financing of the proposals had to be in place by September—before the refinancing deal for the core Corus UK business is due. The whole plan is susceptible to the slightest flaw in the investment programme. Will Corus aerospace customers, even now, be looking to new markets as they see uncertain and failing management putting together a rushed business plan in a mood of financial crisis?

I acknowledge unashamedly that behind my efforts to secure this debate is my concern for the jobs and the workers in my constituency and my awareness of their contribution to life there, but the issue is wider than that. I am sure that the Government are eager to help. Indeed, I believe that they well understand the importance of the industry, its place in export markets and its links with other key sectors such as the motor and aerospace industries. I appreciate the Government's support on steel tariffs and the resources that have already been put into the Advanced Manufacturing Research Centre.

However, in recent years Corus kept the Government's support at arm's length. It is now apparent that there never has been a strategic plan upon which to consult. This debate takes place at the start of a week in which the Government will urge us to endorse plans to bring the flexibility and risk-taking of the private sector into our major public services. In return, the Government must show that they are prepared to intervene in a major way when failures in the private sector, however they are caused, put our national interest and economy at risk.

It was clear by the end of the last Parliament that the steel industry's planning was seriously awry. Falling share prices had led to knee-jerk closures during the previous 10 years. One third of the industry's capacity has been lost. For Parliament, the decision last Tuesday was not only about the future viability of one company, Corus, but about a future vision for the British economy. The workers and the town of Stocksbridge epitomise 100 years of skills and in-depth expertise. It is the task of the Government to play to such strengths and to build for the future. We will not be forgiven if we allow a mistaken decision made in the context of one company's financial crisis to threaten the future prospects of steelworkers and manufacturing nationwide.

9.47 am

Corus's announcement on 29 April meant that its steelmaking will be concentrated in Port Talbot and Scunthorpe when enhancement works have been completed there in about two years, and that Teesside's slab and bloom will no longer be required. Teesside has been an integrated though depleted steel plant since the close of the coil plate mill in the last round of cuts. Secondary steel making will continue at Teesside—it makes structural sections—but its sections mill will get raw steel from Scunthorpe. It will not even be allowed to supply its own mill.

Teesside will have to sell all its annual output of a minimum of 3 million tonnes of slab and bloom on the stiffly competitive world market, so it will have to corner some 10 per cent. of the world market of about 30 million tonnes. That will have to be done from a standing start, because it has exported only some 120,000 tonnes so far this year. Furthermore, Corus says that the new enterprise must also be cash-positive.

It has long been understood that the future of British manufacturing is in sophisticated processes with high added value. As we cannot compete with the rest of the world on cost, the commodity end of any production is doomed to fail. The production of bloom and slab is the most commoditised part of the steel industry. Teesside was able to finish both long and flat products until 2001 and can still finish long product, which is where the profit is, but such production will be totally removed from Teesside.

Can Teesside's integrated steelworks survive as a merchant mill for slab and bloom? Corus have made it clear that the works will close if it cannot. Redcar steelworks directly employs 2,900 people, and 13,000 other jobs in Teesside depend on it. In April, unemployment in the Tees valley stood at 5.1 per cent., almost twice the national average, and that was with a steelworks. Twenty-five years ago, 30,000 people worked at the steelworks. Job cuts during those years were as much the result of improved processes as of the decline of the industry.

The steelworks in Teesside integrated with Llanwern, and since 2001 has sent its raw steel there for turning into hot-rolled strip. The unions tell me that Teesside steelworks in combination with Llanwern is making a profit. In that integrated form, it will make a considerable profit for Corus during the next two years as the predicted upturn in steel demand in western Europe and the UK emerges. It is easy for outsiders to see Teesside and its possible closure as another branch of an old industry in inevitable decline from competition in labour costs. However, through the integrated process, Teesside is currently competitive.

Problems and decline since 1999 in Teesside and UK steel generally have not been due to the inevitable decline of an old industry. They are due to the ineptitude of Corus. The merger with Hoogovens was intended to give British steel scale in the global market, but it was a catastrophe. Since it happened, there have been 11,000 job losses in the UK, and 1,150 more outside of Teeside were announced last week. Five plants have been closed or partially closed, including the coil plate mill. Corus's share of the UK market has slipped markedly.

Corus was going to buy Katowice steelworks, but it did not. Corus was going to merge with CSN, a Brazilian company, but it did not. Corus was going to sell its aluminium business to Pechiney and raise cash to pay off its debts, but it could not. It was not in debt to start with; it was cash rich. It would not be in such significant debt if it had not paid a £700 million merger dividend to its shareholders and paid off no fewer than four chief executives since 1999. All were handsomely paid off, but all were hopeless failures.

A massive further fault with Corus's management is that they are not just uncommunicative, but secretive. In 2001, during the last round of cuts, they did not talk to the unions, MPs, the Secretary of State, nor to the Prime Minister, although I am told that they had the chance to do so. The then Secretary of State, to whom I spoke on the day before the announcement, asked where at Teesside the announcement was going to be made, to work out which bit of the works was likely to be axed. That shows how far out of Corus's confidence the then Secretary of State was. Consequently, no one in Teesside trusts Corus.

In 2001, the coil plate mill was closed, and the slab had to be sent to Llanwern to be finished. No one thought that that would be profitable because of the extra logistical costs. It is a very odd rationalisation and a bizarre way of maximising profitability to send slab at a freight cost of about £10 a tonne to be processed 200-odd miles away.

Unsurprisingly, Teesside people thought that they were being set up to fail. We thought that Corus would turn us into the weakest link, and the only word we would ever hear directly from the company would be "goodbye". "No", said Corus, as always speaking after the decision had been taken, "we have drawn a line in the sand. There will be no more rationalisation." I was told this Friday by Corus management that they have forecasts until 2012, so they spoke with authority when they drew their line in the sand.

Teesside made the odd amalgamation with Llanwern work. It shaved time, refined the process, met every productivity target and sent slab to Llanwern at a profit. Corus said that a line had been drawn in the sand and that there would be no more cuts, but to make sure of that, Teesside made a profit. The fantastic steelworkers of Teesside performed a miracle, so why are they now being cut loose, set adrift and told to find their own way? It seems obvious now that the union was right in 2001: Corus was making Teesside the weakest link, and now it is saying its deferred goodbye. Few in Redcar think that the new business venture can succeed; even fewer think that Corus thinks that it can.

This time, too, the company did not consult its work force or anyone else in Teesside before dealing the death blow to the mainstay industry of the whole sub-region. What it did this time was worse. It announced restructuring and then left it a month, while everyone in every steel community worried that it would be their plant that would go. The imposition of information and consultation requirements on companies such as Corus is long overdue.

The 2001 cuts at Redcar coincided almost to the day with Marks and Spencer's attempt to close its Paris store. The contrast between Marks and Spencer's patent inability to do that and the ease with which Corus cut 600 jobs in my constituency was educational. An obligation must be placed on such companies. Private enterprise, for its own sectional interest, cannot go on alone with no consultation, making decisions that can economically cripple an entire sub-region without opening up its thinking processes to anyone. Corus cuts itself off from better ideas, from stakeholders such as the union, the regional development agency and the sub-regional partnership, which has a broader view of the aims of industry and can assist towards better decision making.

Consultation and information directives will be introduced in 2005, but we need information in Teesside now. It is not wholly impossible for Teesside to survive as a merchant mill; it is supremely well located for the import of raw material and the export of steel. Teesport can handle the largest bulk carriers, offering massive cost advantages to sea-borne transport. The plant is self-sufficient in coke. It has a flexible work force and a lean cost base that might become leaner, but we need information.

Teesside has no sales force. What sales resources will be allocated? Corus has no current market in slab and bloom. How is Teesside to promote its exports? How can the port handle 3 million tonnes, given that 1.8 million tonnes now travel by rail to Llanwern, the present capacity of which is 1 million or 1. 5 million tonnes? Teesside is self-sufficient in coke, but is the whole company self-sufficient in coke? If not, who receives priority? Does Teesside?

I call on the Government to use all their leverage to obtain such information from Corus quickly. I echo the words of my hon. Friend the Member for Sheffield, Hillsborough (Helen Jackson). We want to know whether this is a real challenge or just a proposal that people at Teesside work for the next two years for Corus only to be turned loose having spent their time earning their own redundancy pay. If it is a real challenge, the steelworkers of Teesside will take it on, and the Government should provide Teesside steel with advice and support, and give all the financial and investment assistance that they sustainably and lawfully can.

The steelworkers of Teesside work miracles with Llanwern. They are highly skilled; they can become Corus's most flexible friends. They are adaptable, tough and strong. They are hard working. Are the steelworkers being duped? That is the question today. I call on the Government to do everything that they can to give my constituents an answer.

9.57 am

I thank my hon. Friend the Member for Sheffield, Hillsborough (Helen Jackson) for obtaining this debate. No one has done more than she has to champion the interests of the United Kingdom steel industry in Parliament. She champions her constituents, too, extremely impressively. I wish to place on the record my appreciation that the debate is being held and for her ongoing work. Members of the all-party steel group in the House of Commons regard ourselves as friends of the steel industry, but it has not always been easy to work with Corus. It is sad that we should now be debating the issue in this atmosphere.

As both my hon. Friend and my hon. and learned Friend the Member for Redcar (Vera Baird) have explained, the past several years have been a pretty miserable time in the history of the steel industry. Repeated restructuring has led to repeated false dawns. Each attempt that the board of Corus has made to re- establish the British steel industry as a major player on the global stage has crumbled. The latest episodes have seen the failure of the merger with CSN and the difficulties with Pechiney. All that we have heard has been a melancholy long withdrawing roar from the British steel industry, although I must say that there is a striking contrast between the unhappy performance and experience of the Corus board and the impressive achievements at regional and local levels.

At Llanwern, in my constituency in south-east Wales, there has been a most impressive and successful partnership between local management and the work force. I congratulate the Llanwern trade union liaison committee and Dr. Mark Carr, who is in charge of Corus Strip Products UK in south Wales, for what they have achieved together. Year on year, there has been impressive improvement in productivity. Notwithstanding the pressures and difficulties, and the buffeting that the work force has taken from the errors of the board, morale has been remarkably high.

However, in the latest announcement last week, 142 of my constituents at Llanwern were told that they must lose their jobs. They are 142 skilled, productive, loyal and committed people, who, through the years of stress and strain, have given absolutely everything to the company. They and their families have suffered yet another body blow because the management of the business at the highest levels have not been able to produce a viable strategy. Such damage to the livelihoods of individual workers, their families and their communities is also great in Stocksbridge, Tipton and Redcar. The anxieties and the exposure of the community in Redcar have already been described by my hon. and learned Friend the Member for Redcar.

What have we to look forward to? We appear to have a strategy that confines itself to defending the home turf; of downsizing to match foreseeable United Kingdom demand. There are difficulties with that, as it is all too clear that UK demand is in long-term decline. The demand in the UK for flat-rolled steel has fallen from 6 million tonnes in 1998 to 4.8 million tonnes now, and I fear that that decline is structural, not cyclical. Are we looking forward to a process of continuing attrition and erosion? Can we say that we have seen the end of salami-slicing, or amputations?

We must maintain Corus's capacity so that it can get back on to the front foot and attack global markets to resume exporting when global market conditions permit. Although it is necessary and sensible to ensure that the core domestic base is sound, viable and able to generate cash at the bottom of the downturn—the company has explained that that is what it seeks to do—we must allow ourselves the margin to do more. The alternative is simply to retreat. I do not think that the market will be static, so it is not a viable option for Corus simply to adopt a static position. The recent strategy is not heroic; it may be sensible in that we must get the domestic base right, but we need a springboard for future growth and ambition.

In the near term, it is crucial that Corus achieves its refinancing. The new banking facilities for working capital must be agreed, as must the new long-term debt to enable investment in new capacity. I welcome the board's intention to invest up to £250 million in improving capacity throughout the UK.

Llanwern has had a happy and successful partnership with Redcar, and we have been pleased to be partners to our friends and colleagues there. Of course, we welcome the decision to invest further at Port Talbot. From the narrow perspective of my constituents at Llanwern, it will be satisfactory to achieve a symbiosis with Port Talbot that ensures that we can buy competitively priced product from Port Talbot that can be finished at Llanwern, and that the total product of Corus Strip Products UK is competitive on that basis.

Can the new leadership do better than its predecessor? It badly needs to. It has had an inauspicious start, and I refer to Philippe Varin's terms of employment, which represent an extraordinary insensitivity on the part of the board. I have with me the press notice of 23 April that explains that Mr. Varin is to be handsomely rewarded. His annual salary will be €1 million a year. He will also receive a pension allowance of 30 per cent. of that, and a further payment of €800,000 to compensate him for the loss of his options in Pechiney.

One might say that that is handsome but not exceptional or exceptionable. However, other features of the contract make me feel queasy. If Philippe Varin is given notice in his first year of service, he will receive two years' pay. No matter how badly he does in that period, he will be quite extravagantly awarded. He is also guaranteed a 20 per cent. bonus in his first year, regardless of his performance or that of the business.

Philippe Varin has agreed to buy 1.1 million Corus shares, and the board has agreed that the shareholders should purchase another 1.1 million shares for him. I am in favour of top management owning shares in their business, but I am concerned about the share option arrangements. I shall not detail them; suffice it to say that there is a big share-options package.

I should like to quote from an article in The Times by Graham Sarjeant on 26 April. Graham Sarjeant is an experienced observer of the business and financial scene, and is a sagacious commentator. He certainly has the interests of capitalism at heart. He held up Philippe Varin's contract of employment with tongs, as it were, as an example of the kind of contract that brings business into disrepute. He makes some serious and important points. He says:
"chief executives' pay should be fully aligned with the interests of shareholders. But that is only the case when directors live off dividends from their shareholdings … Directors usually make more money if the cash that should have been used to pay dividends is instead used to buy back stock just before share options mature. That is one of the key reasons why share buybacks proliferated in the good but corrupt times while dividends lagged behind profits, helping to make the fall in UK share prices one of the worst in the world."
He concludes:
"Deals such as this guarantee that boardroom pay deals will continue to create headlines, continue to make investors unhappy with boards and continue to provide ammunition for those who really do not trust business anyway … Jim Leng, deputy chairman of Corus, is due to take over the chair in five weeks' time. He has discredited himself before he starts."
This is, of course, part of a wider problem. There have been rows about top executive pay in recent weeks involving British Gas, Shell, GlaxoSmithKline, Reuters and Cable & Wireless, as well as Corus. My right hon. Friend the Secretary of State for Trade and Industry is quite right to address the problem.

I do not blame Mr. Varin. With such a package being offered to him, it is not surprising that he is taking it. I have nothing against him personally, and I hope that he succeeds. I also hope that Graham Sarjeant's judgment on the reputation and standing of Mr. Leng proves wrong, because it is desperately important for Corus and all who sail with her that the board and top management establish a good reputation and perform well. The package was not only tasteless but foolish, and was against the interests of Corus and British business. Meanwhile, we shall wait and see, and do all that we can to assist the board in holding steadily to a workable strategy.

I now come to the supportive role of the Government. Their task is to pursue policies that do not frustrate competitiveness, and to support the group, as far as that is possible. Such support means exercising continued vigilance in the matter of dumping. I am pleased that the United Kingdom supported the European Commission in taking anti-dumping measures against Slovakia and Turkey, and is encouraging the Commission to intensify anti-dumping measures against Bulgaria and South Africa. I notice that the UK objected to taking anti-dumping measures against Egypt on the basis that the damage that had been done so far, and that which was foreseeable, was not sufficiently severe. However, I was interested and personally pleased—Corus was certainly pleased—to see that the Commission disagreed with the UK.

Similarly, we must maintain all efforts against protectionism. I have nothing but praise and appreciation for the part that the Government have played in mounting a vigorous response to the section 201 protectionist measures introduced by the Bush Administration. The Government have been working with the Commission, the all-party steel group and the British-American Parliamentary Group. We have between us done something to alleviate the position, and the result is a significant reduction in the quantity of steel subject to restrictions and tariffs that is exported by Corus to the US. Nevertheless, the relevant quantity is some 600 kilotonnes—that is major damage. There is no shred of an excuse for what the US Administration have done.

On the issue of section 201 and the steel tariffs, is it not correct that the World Trade Organisation has found against the US Government partly because of the pressure? Is it not the right time to press the US Government to accept the WTO's decision, rather than move in and appeal against it?

I absolutely agree with my hon. Friend. If the US has a rational, shrewd perception of its own interests in the wider context of international affairs, it will not want to be seen to be flouting international law and agreements. I am not entirely optimistic, because policy on such matters is effectively made by Mr. Karl Rove, who is advising the President on his re-election campaign for 2004 and who has targeted with pinpoint precision certain constituencies and swing districts in which steelmaking interests and jobs are at stake. I fear that that set of considerations will weigh more heavily with the Administration than the factors to which my hon. Friend has rightly drawn attention.

The Government should continue the drive to eliminate uncompetitive excess capacity across the globe. One of the anxieties around US protectionism is that certain US plants, which would not have been regarded as competitive in global terms, are coming out of chapter 11 and back into full production. That cannot be right. We must pursue the Organisation for Economic Co-operation and Development process to remove excess and uncompetitive capacity rationally, reasonably and on a phased timetable. The British steel industry has already made a massive contribution to that process and others must follow suit.

I hope too that the Government will be vigilant and energetic on state aids that may persist in countries in central and eastern Europe that are looking forward to entering the EU. Time being short, I will not detain the House with excess detail. I will only say that in Slovakia the new owner of the largest steel company has been given a favourable tax break and that only light output restrictions are required. I am advised by Corus that in the Czech Republic only relatively light capacity reductions are being offered in exchange for financial restructuring subsidies and that the Polish Government have made several restructuring proposals, each based on a totally unrealistic marketing plan, with negligible capacity reductions in exchange for considerable quantities of state aid. We all welcome the enlargement of the EU, but that should not be at the price of enabling countries that are low-cost producers to enter a free trade area and get around the rules constraining the longer-standing member states and their steel industries. Such matters are international responsibilities for the Government.

At home, we need to ensure that we have infrastructure in our industrial areas—particularly rail infrastructure—that is properly serviceable and has reasonable charges for access.

Will the Minister say whether the iron and steel employees re-adaptation benefit scheme—ISERBS—or an equivalent scheme will be available in this round of restructuring to people who have lost their jobs and need assistance in retraining and preparing themselves to take a different place in the labour market?

Corus has been lobbying for a long shopping list of tax changes. I have only limited sympathy with its complaints about taxes that are supposed to induce better environmental behaviour, such as the renewables obligation, the landfill tax and the aggregates levy, but I hope that the Government will heed what it says, and that they will not gratuitously impose any more taxation on our manufacturing industry than is truly justifiable in a wider context. I draw particular attention to the climate change levy. I am getting frustrated at being brushed off by the Treasury with bland, vacuous and patronising letters that fail to address our manufacturing industries' legitimate concerns about the levy or to respond to the point that Corus makes that a business that is trading internationally in intensely competitive markets already has plenty of incentive to reduce its costs and that the more that it pays in tax the less it has available to invest in energy-efficient technology. That is a serious point that deserves a serious response.

The euro is the final issue on which the Government have to take a major decision. Corus has complained too much about the exchange rate: in recent years, it has had to cope with problems to do with a relatively strong pound, but its campaign to persuade the Government to enter the euro is misplaced, and it is something of an alibi to distract attention from the deficiencies of strategy in the business, which we have talked about.

It cannot be sensible for our steel industry to be dumped into the industrial black hole that is the eurozone. There is a world of difference between legitimately seeking policies that may cause the pound to fall somewhat in value against other currencies—difficult though it is to know what those policies could be—and proposing that we go into a permanently fixed exchange rate system with a single interest rate, which will certainly not be pitched at a level to suit us. The result of doing so would be that the stresses would have to be carried on pay and jobs, as they were during the period of the gold standard. The best prospect for the British steel industry is for it to be a well-run business in an economy that is well-run by our own elected Government.

10.17 am

Mr. Deputy Speaker, I know that if it were not your job to chair this debate you would be taking part, as you are a Teesside Member of Parliament and you have championed the cause of steelworkers in the past.

I congratulate my hon. Friend the Member for Sheffield, Hillsborough (Helen Jackson) on securing this important debate, and I strongly praise her tenacity in sticking up for those of her constituents who are about to lose their jobs in Stockbridge. However, as a Teesside Member of Parliament, I naturally wish to focus on what I consider to be a threat to the continued future of Corus on Teesside, and to comment on the links between that and our economy.

This is an important issue that is close to my heart. For 14 years, I worked at what was then British Steel, in research and development at the Teesside technology centre, and I played a role in many of the plants that are under threat, including the Redcar blast furnace and coke ovens and the Lackenby works. I have made many strong friendships among the people who work on the plant and in the iron and steel-making complex. However, like my hon. and learned Friend the Member for Redcar (Vera Baird), I want to focus on Teesside as a whole.

Corus has made it clear that it no longer sees its Teesside works as a supplier of steel slab, the most basic commodity in the industry, to its finishing works elsewhere in the UK, and it wants slab production to be concentrated on Port Talbot and Scunthorpe. It argues that Teesside can find a new role and gain new opportunities by supplying steel slab to overseas markets. What concerns the people of Teesside is how deeply the plan has been thought through.

The Teesside complex manufactures some 3 million tonnes of steel per annum and almost all of it goes to Corus operations elsewhere in the UK. A small amount is traded on the international commodity markets. The international market for slab is cyclical; across the globe there are a number of established suppliers of bulk steel, many of which seek to cement long-term arrangements with customers. At present, global demand varies between about 20 million tonnes per year at the bottom end of the cycle and some 30 million tonnes at the upper end. If the Corus board wants its Teesside operation to enter that market at its present production levels, the product will have to displace some 10 per cent. of the existing market, much of which is made up of traditional, low-cost producers from countries such as Brazil, Russia and China, so the board is advocating a tough approach.

To be successful Corus requires severe cost-cutting on a scale that has perhaps never been equaled in the United Kingdom steel industry. It will almost certainly require investment by Corus management locally and nationally to build up a dedicated and skilled local, national and international sales force—a point made by my hon. Friend the Member for Sheffield, Hillsborough. Such an approach means that an urgent examination is needed of whether it is possible for Corus to enter a strategic partnership either with another steel producer or with a core customer and consumer. I feel strongly that it may also have to consider whether the plant could simply be sold.

These are uncharted and deep waters. The people of Teesside are prepared to accept great challenges if they have to, and this could be Teesside's greatest ever challenge. It is possible that the strategy will succeed, but it requires firm, decisive action by the Corus board and decisive action by its new chairman and chief executive; the foundation of that action must be put in place very soon. Entering new markets or building up strategic alliances or joint ventures takes time. Corus says that capital investment is needed to allow Port Talbot and Scunthorpe to take up the tonnage required by the exit of Teesside from the internal markets, which will take about two years to design and construct, and, given the complexities of the due diligence procedures for entering into a strategic alliance or joint venture, almost all that time will be needed for any agreement to be reached.

I simply ask the new Corus management to be open and honest with their Teesside work force and the wider Teesside community—a point that has been made by my hon. Friends. If the management believe that the plans are properly constructed and thought through, and realistic, they must be prepared to share them with all the local stakeholders. There is a mood of co-operation on Teesside but that co-operation must be won. Any suspicion that the Corus board is merely trying to defer inevitable closure for two or three years and effectively to push the redundancy costs off balance sheet for the time being to reassure institutional investors and bond holders, or that the cash needed to invest in the modernisation of Teesside processes and the building up of a sales force is simply not at hand will mean that co-operation will not be won. A massive wave of anger against the board—I emphasise the board—which has been visibly failing for many years, will sweep across Teesside unless it changes its approach.

Everyone knows what the cost of closure will be for my constituency and for other Teesside constituencies. In 2001, the time of the last major threat to steelmaking on Teesside, a baseline economic analysis was prepared by the most affected local authority, Redcar and Cleveland borough council, and the regional development agency, One NorthEast. The figures from that survey are still relevant today. The loss of jobs will have a direct and dramatic impact, not only on the 4,500 staff directly employed by Corus but on the many thousands of others working for contractors on the site. According to the generally accepted multiplier, a further 1.7 jobs will be affected for every direct job lost. Some 7,000 jobs could be lost in the Teesside area, including those in services, local docks, freight forwarding and logistics, specialist engineering services, contract engineering maintenance and areas such as IT and telecommunications. Job losses on that scale will hit the GDP of the entire Tees valley.

The model used in the survey suggested that each redundancy would incur a loss of some £28,000 per head, leading to a total GDP loss of some £230 million in Teesside alone. That would have an impact on house prices and on investment in economic activity such as retailing. At the stroke of a pen, the work done in righting the economy since the slump of the mid-1980s and early 1990s, which incurred so much pain and suffering, would be undone.

Teesside deserves better. It certainly deserves better than the old-fashioned failed management style of Sir Brian Moffatt and his approach to running Corus. It deserves a new, innovative approach from the new chairman and chief executive. They have promised to consult, which I welcome. I think that all people on Teesside welcome that. They have said that they want to talk to local workers and managers, who will be able to tell them of the potential of the Teesside works and what the creativity, innovation and enterprise of the whole work force could promise for Corus's future.

As I said earlier, however, Corus has to be honest and open with Teesside. My hon. Friends have made that point over and over again. It has to be honest with local stakeholders and, of course, with our Government. That point has been made in relationship to the run-up to the cuts made by Corus two years ago. We can assist Corus with its strategy for Teesside if it can convince us that it is intellectually coherent, based on proper detailed analysis and able to be delivered.

Over the weekend, I spoke to many managers and middle managers. The views that I have given to the House today are shared by many. Given the difficult times that Corus and all of us are facing, Corus needs to know that until it demonstrates that openness, it is, for the people of Teesside, on parole.

10.28 am

I congratulate the hon. Member for Sheffield, Hillsborough (Helen Jackson) and her colleagues, the hon. and learned Member for Redcar (Vera Baird), the right hon. Member for Newport, East (Alan Howarth) and the hon. Member for Middlesbrough, South and Cleveland, East (Dr. Kumar) on setting out the critical problem facing the industry. All four communicated the very real sense of pride that MPs representing steelmaking communities have and their willingness to fight for those communities.

At the outset, however, I ask whether this is the best way of advancing discussion of the subject in Parliament. I understand that the Secretary of State had meetings with the management on Friday—that was reported. Although it will be useful to hear from the Minister, I wonder whether the matter is sufficiently serious for the Secretary of State to give a statement on it to the whole of Parliament. Perhaps the Minister can tell us whether that will be possible.

The key data quickly demonstrate how serious the problem is. Back in 1997, the British steel industry under Corus produced 18.5 million tonnes of steel. Once the restructuring plans are completed, that figure will be down to 10.5 million tonnes, which means that production will almost have halved within six years.

There is the fairly optimistic hope that the Redcar plant—its problems were described by the hon. and learned Member for Redcar a few moments ago—can sell 3 million tonnes of steel in the world markets. I am not in any sense an expert on the steel industry, but I understand that the plant's production costs are between $180 and $200 a tonne for standard commodity product, while its competitors in Brazil, China and Taiwan have production costs of about $100 a tonne. In an open, competitive market, it is difficult to see how that plant can survive without miraculous changes.

Those comments concern output, but the position on employment is even more extreme. I remember 30 years ago when the steel industry directly employed 250,000 people, regardless of indirect employment. That figure was down to 22,000 in 1999, and, after the successive waves of closures in the past few years, the figure is down to 11,000. We are dealing with an enormous contraction, the positive side of which—one should not forget this—is that there have been phenomenal increases in productivity. The work force have co-operated over the years in endless waves of productivity improvements and have given their all to try to save the industry through productivity gain, which has simply not been enough.

Finance is the other key indicator, and the figures are stark. In 2001, the operating loss was £385 million and last year it was £293 million, which is clearly unsustainable on any measure. The share price has also collapsed from 126p to 26p, and it is worth recording that that is not unprecedented. The British steel industry has an entry in the "Guinness Book of Records" for the worst ever financial performance, which occurred in 1980–81 when it made a loss of £1 billion on a turnover of £3 billion. Conditions were similar to today in the early 1980s because the currency was heavily overvalued and there was a recession in manufacturing industry. Those figures point to the extreme difficulties in getting the industry to run competitively.

In analysing where we are, the key question—all Members who have spoken have touched on different aspects of this—is whether the fundamental problem is one of business environment or one of management failure. Both issues are clearly involved because any industry could probably survive one or the other, but it is difficult to see how any industry could survive both. Although I certainly do not want to make excuses for management, it is clear that it has been operating in an enormously difficult business environment; in particular it has suffered from problems associated with the exchange rate. The right hon. Member for Newport, East tended to de-emphasise that point, which is very important.

I do not want to reopen the argument about the euro, but since the mid-1990s, the effective exchange rate under which the industry has been operating has appreciated by about 30 per cent. That would be a problem for any industry, but for an industry such as bulk steel, which competes predominantly on price, it is crippling.

When the merger went ahead between Hoogovens and British Steel, British Steel was making a profit of £1 billion and was very successful in world terms. Systematic management decisions have played a big part in creating today's situation.

The hon. Gentleman is right that there have been management failures, which I shall briefly summarise in a few minutes. Whatever those failures have been, however, it is difficult to see how any firm could export a basic commodity for many years against that kind of exchange rate disadvantage.

The problem is not only that the British steel industry is exporting a commodity in the face of an extremely hard exchange rate. About 80 per cent. of its product goes to Europe, where it directly competes with euro-denominated products. Additionally, most of its other competitors are in the far east, where currencies have depreciated heavily against sterling. The exchange rate has been a major handicap, which one should not underestimate, and it has created an awful business environment. The irony is that this rather desperate phase of events is occurring precisely when there is some hope that the exchange rate is beginning to return to sensible levels at which the industry could possibly compete in the medium and long terms.

The hon. and learned Member for Redcar has clearly set out the management failures. One was the enormous £700 million dividend payout, which could arguably have been more usefully reinvested. There was a failure to carry through the deal with a Brazilian company. I am not sure how much that would have helped because if it had been successful, a lot of production would have been relocated to Brazil. Nevertheless, that was an objective and it failed.

There was a failure to understand the difficulties of disposing of the aluminium interests in Europe. Last but not least is the psychologically important point of the sheer insensitivity—I think that was the word that the right hon. Member for Newport, East used—of senior management in approaching their position.

We are dealing with an industry in great difficulty. Workers face constant retrenchment, yet the company's first preoccupation always seemed to be its own pocket, and the demoralising cynicism that that generates is difficult to underestimate. Mr. Peddar received a £650 million payout, plus a £2.3 million pension. The chairman who has just retired has a £300,000 per annum pension. I do not begrudge top management being paid well, but those people presided over a failed company, and it is the issue of payment for failure that is crucial. In the debate that we will have immediately after this, the hon. Member for Tunbridge Wells (Mr. Norman) will put forward some ideas on how to deal with the problem. It is difficult to underestimate the effects on the industry of that sheer short-sighted, selfish insensitivity of management.

I want to know what the Government can do, and perhaps the Minister will bring us up to date on what they intend to do. There has been speculation in the press this weekend that the Government are considering, or have at least been approached about a proactive form of intervention, even involving underwriting of refinancing. The industry has been arguing for renationalisation. I would have thought that improbable and certainly unwise, but perhaps the Minister will clarify whether the Government are willing in any circumstances to consider direct involvement through guarantees of financial support.

How far are the Government getting into discussions with the industry about strategy? There are all sorts of options opening up. The industry can continue under its present owners and with the present strategy. Other possibilities have been considered. The Mittal Group is known to be nosing around the industry. There are fears that its involvement would involve asset stripping and an even worse outcome than we have at the moment. Have the Government had any discussions with that group? Would they entertain the idea? What are the other strategic options and how far have the Government considered them?

What are the various practical forms of help that the Government could give? They were summarised very well in the speech of the hon. Member for Sheffield, Hillsborough, and I do not need to go over them in detail, but clearly the Government can help, as they have helped with earlier difficult situations in the steel industry and the car industry. They helped to retrain workers who had been laid off and provided retraining and restructuring operations working with the regional development agency. As the hon. Lady said, there are a lot of useful things that the Government can do, such as helping with skills training and research and development, without resorting to the classic bail-out. Perhaps the Minister could summarise those in his reply.

To return to the point that I made at the outset, I suggest that the situation is sufficiently serious that it merits a statement by the Secretary of State to the House as a whole.

10.38 am

I congratulate the hon. Member for Sheffield, Hillsborough (Helen Jackson) on securing the debate, and also on the work that she has done with the all-party steelgroup. I would like to declare my interests that are in the Register of Members' Interests.

I thought that the hon. Lady made a very interesting and moving speech. I was particularly interested to hear about some of the important work that has gone on. She mentioned the Advanced Manufacturing Research Centre, the links with aerospace, and the way in which so much effort has gone into building links between the steel industry and new specialisms, particularly wind farms and other value-added areas of production.

I had a look at Corus's press release on Stocksbridge. There is some confusion; it says that the aerospace steels and all finishing of engineering billets will remain at the Stocksbridge site, but there will be a closure of steel making and hot rolling at Stocksbridge. Corus said that that would happen in due course, but I gather from the hon. Lady that that has already taken place.

No, even Corus cannot close a melt shop overnight. The closure of the melt shop is scheduled for 2005, which is why it is so important that there be independent consideration of whether that is the best course of action.

I am grateful to the hon. Lady for putting me right because I was slightly confused by what she said; she has made things absolutely clear now. There certainly has been confusion on the part of Corus. I agree with her that the proposals have not been properly worked through in any way, shape or form.

I was staggered when I saw from the Corus press release that it is expecting Teesside basically to stand on its own feet. Corus is not going to close the Teesside works, but it will no longer take any of the steel output, so, as the hon. and learned Member for Redcar (Vera Baird) pointed out, Teesside will have to secure 10 per cent. of the world market pretty well from a standing start. That will have huge implications for the nearly 3,000 people employed directly and the many others employed indirectly. I was interested when she said that Teesside, combined with Llanwern, is making a profit at the moment and is competitive. I take on board her point about the need for Corus to re-evaluate that part of the package.

We need to focus on the Government's relationship with Corus. In February 2001, the then Secretary of State made a statement pointing out that:
"Corus has failed to discuss its plans with the Government. Relevant information has not been disclosed; the company has resisted any meaningful dialogue and has refused to discuss in detail its plans for the industry … Corus could adopt a different approach. If it were to do so, it would have the support of the Government."—[Official Report, 1 February 2001; Vol. 362, c. 457–8.]
What have the Government done since then to build a meaningful dialogue with Corus? I know that it takes two to make such initiatives work, but have the Government put in place any firm proposals in the past two years to build the relationship and the dialogue? I am talking, for example, about considering the banking covenants that Corus has.

As the Liberal Democrat spokesman, the hon. Member for Twickenham (Dr. Cable), pointed out, there certainly is substantial scope for the Government to sit down with Corus and work out exactly what the long-term strategy will be. After all, the Government have made a great deal of their strategy for manufacturing, for aerospace and for the car industry; what about a strategy for steel, as well? The right hon. Member for Newport, East (Alan Howarth) was quite right to refer to the way in which senior management at Corus have been at fault in not building bridges with the Government. If effort had been put into that, when the management really needed a proper dialogue with the Government, the Government would have been available and ready to help.

I take on board the point about the package for Philippe Varin. If one considers the attitude of the Corus management over the past few weeks, one can see that they have, as the right hon. Gentleman pointed out, been on the back foot. They have shown little sign of any inspiration or a "can do" attitude. They seem to be floundering to some extent. As one commentator pointed out:
"Corus has the knack of turning a crisis into a drama."
It chose to hold its annual meeting last Tuesday at the TUC headquarters. As that commentator pointed out, that is
"a bit like the IRA holding its Christmas lunch at the local Orange lodge."
Perhaps it is a bit unfair to compare Corus to the IRA, but I can see what the commentator was getting at.

I agree with the right hon. Gentleman that Philippe Varin's package should have been linked entirely to the future performance of the shares. When there has been much debate about corporate governance and rewards for failed directors in this country, it is quite extraordinary that Philippe Varin should be on a guaranteed 20 per cent. bonus and a two-year contract, and compensated for the loss of his Pechiney options. There is no question but that his package should have been linked to any uplift in Corus shares. If he delivers in any shape or form, it will be reflected in the share price, to which the package should be tied. Corus should have had the courage to say very clearly that he would not be employed if he was not prepared to accept a package based on such terms. As has been pointed out, he will be a success. He is a highly able individual. However, the company was in a strong position, in that many potential candidates with experience of the industry in this country were available to take the job, so he was not unique in that respect.

I was interested in the right hon. Gentleman's comments on the very impressive achievements at local level and the extent to which morale has been built up at the Llanwern plant. He spoke about the 142 skilled people who are to go as a result of the most recent announcement. I should have thought that that would hardly make a dent in Corus' substantial losses, but it will cause a disproportionate amount of damage to morale in the plant and will undermine much of the good work that has been done. The right hon. Gentleman made that point particularly well.

As the right hon. Gentleman also pointed out, it would be wrong of Corus to consolidate within the UK ring-fenced environment. The Opposition entirely agree. At some stage, Corus must get back on the front foot. It must accept the possibility of world demand increasing substantially and keep open the option to exploit that and move forward.

That point was also made by the hon. Member for Middlesbrough, South and Cleveland, East (Dr. Kumar). I was particularly impressed by his comments about the knock-on effect of the loss of a substantial number of jobs in his constituency and that of the hon. and learned Member for Redcar. It may not sound a vast number, but the knock-on effects on services, subcontractors and other industries will be devastating. That point is often missed by commentators, and it is unfortunate that that particular saga has been ignored by so much of the media.

The Minister should tell us exactly why the Government will not make a statement on this very important issue. I believe that some of the confusion among Members is based on a lack of information—there have been conflicting reports in the press. The Government made a statement in February 2001, but I would like the Secretary of State or at least the Minister to make a statement this week. I am sure that that will be possible if he has a word with the Speaker.

Will the Minister tell us exactly what value the Government can add? We discussed only recently the Industrial Development Act 1982 and the Industrial Development (Financial Assistance) Bill. What scope is there under legislation for industry-specific assistance within EU rules? We had an important debate about the ceilings being lifted substantially. There is now much more money available for industry-specific schemes, and there may be an imaginative way of using some of it. Will the Minister also comment on whether a new iron and steel employees re-adaptation benefits scheme will be introduced?

I hope that the Minister will comment on the points that have been made about the climate change levy, the extra taxes that have been put on industry and, above all, the need for the Government to show the industry and the business world that they fully understand the issue, that they will work with Corus in the future and that there will no longer be a lack of proper communication between them and Corus. I would like him to tell us exactly how the relationship with Corus will be rebuilt and what the Government can do about this extremely serious situation, which affects the lives of many people, not just in the constituencies of the four hon. Members who have spoken today but in many others as well.

10.49 am

I congratulate my hon. Friend the Member for Sheffield, Hillsborough (Helen Jackson) on securing the debate. It is consistent with the enormous work that she has done for the steel industry for many years, not least the formation of the all-party steel group. This is a particularly apposite moment to discuss the steel industry, because it is a time of great concern for the industry and those whose livelihood depends on it. I listened carefully to the expressions of concern about the future of the industry, its employees and the communities in which they live.

In the time left, I hope to hone in on the contributions made, but first I want to stress that the Government share the concerns that have been raised. We care deeply about the industry. We want a successful and profitable steel industry that will underpin UK manufacturing and feed into the many supply chains that rely on primary steel production. It is disappointing that, just over two years after we last debated the issue in this Chamber, the steel industry is again experiencing problems, and that steel workers continue to face an uncertain future. Corus accounts for more than 90 per cent. of the UK's steel production. Last week's announcement that it must undertake further restructuring will come as a bitter blow to many, especially as it follows the job losses that the company announced in 2001, which we hoped would lead to a more stable and successful future.

Steel remains an increasingly difficult market in which to operate. We all accept that. The industry has for some years been beset by global overcapacity and weak prices. It is estimated that there is 15 per cent. overcapacity in Europe. Although EU demand has remained static, global production has been boosted by the rapid development of capacity in the emerging economies of Asia—especially China—and south America, where low labour and raw material costs, exploitation of economies of scale and the latest technology have given the producers a competitive advantage.

Although it is true that UK workers are among the most productive in the world in terms of tonnes of steel made per person, we continue to experience problems, and more cost is being taken out—witness last week's announcement. However, all the major European steel manufacturers are having a difficult time in a tough global market. It is important that, in today's debate, we concentrate on what we can do to assist.

My hon. Friend the Member for Sheffield, Hillsborough mentioned a series of measures that we could take. Of the four that she highlighted, we can certainly assist with three, and I shall mention what we can do in relation to research and development, training, education, skills and spreading best practice. It is important to mention that the decision to restructure was a commercial choice for the company, and that the strategy and financing of Corus is a matter for its management, the shareholders and the banks. I am sure that there will be independent assessments and scrutiny of the package. However, we must be very clear about what the Government can and cannot do in such situations.

My hon. Friend also gave us a fascinating history of Stocksbridge that took us from corsets to landing gear—from underwear to undercarriage, one could say. I stress that Stocksbridge will continue to finish high-added-value steel for the aerospace market. I realise how important that is.

My hon. Friend asked some fair questions about the strategy of Corus—questions that she and her colleagues will be asking in coming weeks or months of the new management team. The chief executive took up his role last Thursday, and the new chairman comes into post on 1 June. Hon. Members will not be surprised to hear that these are also the questions that the Government have asked in our meetings with Corus, and in particular during the meeting between my right hon. Friend the Secretary of State and Corus's management last Friday.

I understand that the job losses will be spread over the next two to three years. However, whenever they occur, the Government will do all that they can to help those affected. It is important to find the positive aspects. I shall come to the contributions of my hon. and learned Friend the Member for Redcar (Vera Baird) and my right hon. Friend the Member for Newport, East (Alan Howarth) shortly, but first let me stress that Corus will remain a major UK manufacturing company and steel producer, employing well over 20,000 people. We must welcome the investment decisions in the announcement, which will strengthen UK sites. We hope that that will lead to a more sustainable future.

The company will have new leadership, and we hope that the appointment of a new top management team represents a fresh start for Corus—relationships have not always been as excellent as they should have been. My ministerial colleagues and I will be encouraging that team to work in "partnership", which was the word used by my hon. Friend the Member for Sheffield, Hillsborough. With its tremendous work force and its constructive trade unions—the hon. Member for Twickenham (Dr. Cable) talked about 250,000 workers 30 years ago—the increase in productivity has been amazing and spectacular. Productivity is one area of UK manufacturing where no one can accuse the work force of lagging behind. We hope that the company will work in partnership with its work force and the unions to optimise the company's assets in the UK and to put it on a much sounder footing. We also hope that it will work more closely with government.

What can the Government do to help the steel industry? My hon. and learned Friend the Member for Redcar mentioned information and consultation, and said that the directive will be introduced by 2005. We are keen to ensure that workers in this country are informed and consulted, and although the directive does not come into force until 2005, many companies should start thinking ahead to where they will be, and begin preparing by introducing best practice ahead of the directive.

My hon. and learned Friend the Member for Redcar was also positive about the plan for Redcar, given the right circumstances. My hon. Friend the Member for Middlesbrough, South and Cleveland, East (Dr. Kumar) made the same point. The Government think that the plant can survive as a self-contained site supplying the global market. With 2,900 people employed there, it is important that it does. It is right to say however, that the plant requires the right climate and atmosphere of co-operation with all those involved, not least the trade unions.

For the most part, business success is down to business. The Government have a role in creating the best environment that they can in this country in which business can flourish. Various hon. Members asked specifically what assistance we can give. For example, there is ISERBS. ISERBS was part of a European Coal and Steel Community treaty, which expired in June. Obviously, we could not use the same method as we have used previously, but we will consider any ways in which we can assist the workers who involved.

I am conscious of areas such as south Yorkshire which have implemented a European objective 1 development programme. Does the Minister agree that regional and national government should also be able to use those programmes in these circumstances?

I agree. My hon. Friend will know that, other than possibly the coal industry, no industry is more bound by state aid rules than the steel industry. However, where we can assist, we intend to do so. We shall certainly place much emphasis on important regional partnerships; that work has already started. We shall also continue the work of the metals industry competitiveness enterprise, NAMTEC—the National Metals Technology Centre. Last year, I launched the advanced metals technology initiative, which is important and must be built on. It is a partnership with the Engineering Employers Federation, and its important work will be developed further.

For the steel industry, domestic demand for goods containing steel is being increasingly met by lower cost imports. In turn, that has reduced home market demand for primary steel. Nevertheless, opportunities are available to steel companies to take advantage of the engineering works that are going to take place in this country. There is increased Government expenditure on hospitals and schools, and on roads and railways, including bridges and other civil engineering works. This will provide significant opportunities for the steel industry.

Steel prices are rising from their trough. The exchange rate is moving in the right direction. The Port Talbot blast furnace is back on line, and there is cause for some optimism—

Order. In calling time on this 90-minute Adjournment debate, I wish to tell hon. Members that although holding the office of Deputy Speaker in Westminster Hall is an honour that is much-prized among senior members of the Chairmen's Panel, the satisfaction that is gained from the exercise of its responsibilities can occasionally be tempered by the frustration and exasperation that is caused by the need to reserve expressions of opinion on the topics under discussion. The stricture to confine comment from the Chair to matters of order, procedure and discipline can be infuriating, and never more so than today.

We must now turn our attention to the next topic—the Higgs review of the role and effectiveness of non-executive directors.