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Pulp Mills: Closure

Volume 413: debated on Tuesday 21 October 1980

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2.49 p.m.

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what are the economic justifications for allowing the closure of the pulp mills at Fort William and Ellesmere Port, with the consequential necessity for the Forestry Commission to seek outlets for timber from the forests of Wales and the Scottish Highlands, possibly to Scandinavia, and then to import the finished paper.

My Lords, the closures result from the decisions of the companies operating those mills, decisions which are based on their commercial judgment.

My Lords, will the noble Earl appreciate that, while I thank him for his Answer, he has not really dealt with the point of the Question? Has a survey or an analysis been made of the net costs of closing these two pulp mills? If not, is one being undertaken, and should it not take into consideration not only the loss of 2,500 jobs at Ellesmere Port and Fort William but also the net cost of unemployment benefits and other benefits, and the net cost of exporting small timber and having to import finished paper? While appreciating the activities of the Forestry Commission in endeavouring to obtain markets for their small timber, is there any long-term plan by the Government to ensure that there are home-based pulp mills in this country for the proper use of our timber?

My Lords, I am sorry the noble Lord did not think that I answered his Question, but he will realise that his Question asked Her Majesty's Government what economic justifications there were for allowing the closures, and my Answer referred to the fact that the closures resulted from the judgment of the commercial enterprises concerned. Of course, we bitterly regret the fact that this has been necessary, and I accept entirely the point the noble Lord has made about the unemployment this has caused. In fact, the two pulp mills have been operating in a situation of making losses. The Government have been in consultation about both the mills, at Fort William and at Ellesmere Port, to see if there are ways in which they can help. Suggestions were made to both companies with regard to substantial financial help from the Government and in both cases it was their commercial judgment that, notwithstanding this offer, they would still have to close the plants.

With regard to the noble Lord's question about the future of forestry supplies, I can tell him that 80 per cent. of the small roundwood which used to go to Fort William has now been placed on contract abroad. We hope that the future for forestry will be a successful one. We believe that there are circumstances where pulp-making can be successful in the United Kingdom given the commercial desire and will to do it, and the Government would be happy to take part in any consultations required.

My Lords, may I ask the noble Earl whether the Government would consider taking some action to prevent the continuous dumping of paper from Brazil, Scandinavia and the United States in this country, to the very great disadvantage of the paper-making industry and the forestry industry in the United Kingdom?

My Lords, if my noble friend can give me any factual examples of where there has been dumping, then, of course, we will consider it.

My Lords, as much of the outcome of this question depends on the Government's forestry policy, can the noble Earl say how long it will be before a statement can be made?

My Lords, I thought the noble Lord said monetary policy; that is why there was a little confusion. There will be a Statement on the Government's forestry policy. It was hoped that this would have been made a little earlier than it will be; I can tell the noble Lord that it will be made some time in the future, but I cannot be precise about it.

My Lords, as the pulp mill at Ellesmere Port has been closed, can the noble Earl say where the output of the Welsh forests will now go?

My Lords, I can tell the noble Lord that 80 per cent. of that which went to Fort William has now gone on contract abroad, and I have no doubt that the Forestry Commission will be in consultations about getting rid of the wood that used to go to Ellesmere Port.

My Lords, that is not a satisfactory answer. Can the noble Earl not be more specific? Is he not aware that unemployment in Wales is very high indeed and that this is causing considerable concern in the Principality? Forestry makes an economic contribution, and if the Welsh forests are affected because there is no output the consequences can be very serious. I would be very grateful if the noble Earl could give me a more particular reply.

My Lords, I cannot tell the noble Lord exactly where the output of the Welsh forests will go. This is obviously a matter for the commercial judgment of those who sell the wood. It would be greatly to my surprise if the noble Lord found that the output of the Welsh forests stopped.

My Lords, the noble Earl really is fobbing me off. Will he be good enough, if he does not know, to find out where the output of the Welsh forests will go and let me know?

Yes, my Lords, I will certainly look into that and let the noble Lord know.

My Lords, is my noble friend aware that it is commonly understood that the difficulty is the high cost of electrical energy? Would he confirm that in fact the turning point of the decision was based on the cost of power in this country as compared with the cost of power in Scandinavia?

My Lords, I would agree with my noble friend that the high cost of energy is one significant point. Of course, the Scandinavians have cheap hydro-electric power which is not available to the United Kingdom. There are two other factors. There is the high level of sterling, which makes imports competitive, and the third factor is the fact that newsprint is internationally traded in dollars, and of course the situation is also affected by the fact that the wood from which that is made in North America is about half the price of the wood which is available in this country. When wood comes in at that price, it is very difficult to make ends meet when you have a high pound.

My Lords, will the noble Earl tell us whether proper consultation took place before the decision to close these mills was taken? Were there consultations with the trade unions concerned in that aspect of British industry, and were the trade unions in the home-grown timber trade properly consulted, the trade unions representing the forestry workers—that is, the National Union of Agricultural and Allied Workers and the Transport and General Workers' Union? And, if not, why not?

My Lords, I cannot give the noble Lord the information he requires. I do not know the details of the consultations which went on between the employers and the employees. I can tell him that the Prime Minister herself was very concerned about these closures and the effect they would have, and she has been intimately involved and intimately concerned with the results.

My Lords, does not the noble Earl realise that every word he has said illustrates the impotence that a Government bowing to doctrinaire monetary policy find themselves in when faced with the most obvious evil, the sudden closure by private decision of the means of processing a public product? The Government have to explain to us that within their doctrine there is absolutely nothing they can do about it.

My Lords, I do, with the greatest respect, disagree entirely with the noble Lord, Lord Paget. There is one fundamental flaw in what he says. He knows, as I have tried to explain, that for reasons of world recession and world competition these mills have been operating at a loss. Two things can be done. Either the commercial effects have to be taken into account and the mills closed—and that is a matter for the commercial judgment of the owners—or the Government can subsidise them and carry the losses which private industry is not prepared to carry. The noble Lord, Lord Paget, may think that that is the right thing to do. The Government have taken the view that they cannot continue to subsidise one industry after another.

My Lords, is not there a fatal flaw in the argument that the Minister himself is using? Is it not true that the Government have required the public suppliers of electrical energy in this country, quite unnecessarily, quite artificially, to raise the charges that they make to commercial enterprises far beyond anything that is necessary to run their own enterprise?

My Lords, that is a matter of strict energy policy, which I would be quite happy to debate with the noble Lord, Lord George-Brown, if he so wished. But even if that had not been so, the Government are not at the receiving end of the cheap hydro-electric power which the other countries have, and in any event the hydro-electric generation would have been cheaper.

My Lords, would not the noble Earl agree that there are times when commercial considerations are not the only factors to be taken into account, and that where there is the possibility of an important industry such as forestry not only having unemployment but not being able to use our timber, something needs to be done? When are Government plans for a permanent solution likely to be announced?

My Lords, of course I absolutely take the point and I would not wish to appear not to recognise it. The Government have been so concerned about both Fort William and Ellesmere Port that they have been in consultation with the owners to see whether it is possible to construct new mills or modernise those plants. Had that been done, the Government would have been prepared to give substantial financial help in that process. We have done that, and we are quite prepared to look at any new proposals that industry can bring forward.

My Lords, I apologise for intervening, but we have been going for 22 minutes on two Questions and I think we should move on.