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Steel Industry

Volume 765: debated on Tuesday 20 October 2015


My Lords, with the leave of the House, I shall repeat in the form of a Statement an Answer given earlier today by my right honourable friend the Secretary of State for Business, Innovation and Skills in another place. The Statement is as follows.

“Mr Speaker, the steel industry across Europe and around the world is facing challenges on a scale unprecedented in recent history. Today we have had further devastating news of redundancies, this time at Tata. So let me begin by saying this to the people of Scunthorpe, Redcar and anyone living in a community where the local economy is built on steel. I know that the current situation is unbearably difficult, and that you are deeply worried about your future, and the future of your families, but let me assure you that the Government are doing and will continue to do everything within our power to support you in the weeks, months and years ahead.

For decades the United Kingdom has prospered on the back of your industry. We will not abandon you now, in your time of greatest need. There is no straightforward solution to any of the complex issues involved, but this Government have no intention of simply standing by. We have already announced a package worth up to £80 million to support people who have lost their jobs as a result of SSI’s liquidation and to mitigate the impacts on the local economy. We have asked Amanda Skelton, chief executive of Redcar & Cleveland Council, to chair a local task force; we have ensured that money reaches workers’ pockets quickly via the redundancy payments service; we have brought workers and opportunities together at a jobs fair, at which more than 1,000 vacancies were showcased by more than 50 local employers; we have provided additional flexibilities to local FE colleges to allow people to take up training to enhance their future job prospects; and we have set aside money to fund those proposals from the task force, which will make an immediate and lasting impact on the local economy.

We will do what we can to soften the blow of any further redundancies among steelworkers, including those at Scunthorpe, of course. Jobcentre Plus and Rapid Response Service support will naturally be available, and we are also setting up a task force that Liz Redfern of North Lincolnshire Council has agreed to chair. I will consider carefully what the task force proposes by way of additional support that may be necessary.

Alongside our immediate help for individuals who are laid off, we are also taking steps to ensure there is a future for Britain’s steel industry in what is an exceptionally difficult market. Excess capacity in global steel is enormous—more than 570 million tonnes last year, almost 50 times the UK’s annual production. The price of steel slab has halved in the past year alone, and in the three years since SSI restarted production at Redcar, the plant has lost more than £600 million. There are limits to what the Government can do in response; no Government can change the price of steel in the global market, no Government can dictate foreign exchange rates, and no Government can simply disregard international regulations on free trade and state aid, regulations that are regularly used to protect British workers and British industry.

To identify where progress can be made, on Friday I hosted a top-level summit with key players from the UK steel industry. Bringing together industry leaders, trade unions, Members of Parliament and senior figures from government, the summit created a framework for action that will help us to support steelworkers now and in the future. First, we will drive up the number of public procurement contracts won by UK steel manufacturers and their partners through fair and open competition. This Government are committed to a major programme of infrastructure spending. I am determined that the UK steel industry should play a central role in its delivery. The new public contracts regulations give us more scope to offer greater flexibility around how we include social and environmental considerations in our procurement activities. We intend to help other departments and business take full advantage of these flexibilities, building on what was learnt from projects such as Crossrail.

Secondly, we will consider what lessons can be learnt from other countries in the EU and beyond. This will include the resilience of the steel sector in competitor countries and the market penetration of national manufacturers. Thirdly, we will look at what government can do to boost productivity and cut production costs. This includes addressing energy and environmental costs, regulation, skills and training. An extensive review of business rates is already under way, and the Government will look very closely at all proposals.

These steps will come on top of action we have already taken. For example, we have paid out more than £50 million in compensation to energy-intensive industries in the steel sector. We also plan to offer further compensation in respect of feed-in tariffs and the renewables obligation. This constitutes state aid, which must be approved by the European Commission. The approval process is under way, but it is taking longer than anticipated, and longer than I would like. My department is working closely with the Commission to answer its concerns and impress upon it the importance of prompt approval. I also plan to meet Commissioners next week to reinforce our concerns about unfair trade issues and gain their support for urgent action. We have already voted to support extensions of duties on wire rod. We will demand action wherever there is evidence of unfair trade.

Since Victorian times, British steel has helped to make Britain great. In 2015 it is vital that all of Britain comes together to forge a stronger future for the men and women to whom this country owes so much”.

My Lords, the steel industry is of vital strategic importance to this country and the Government need to safeguard its future. The hard closure of Redcar, the announcement from Tata and the announcement from Caparo reveal how serious the problems are, with the expected loss of more than 5,000 direct jobs and many more indirect jobs. This is a crisis for the employees, families, communities, supply chain and local industries.

We are very conscious that there are issues in the market of price and overcapacity, but there have been long-term concerns about the structure of the UK steel industry. We are keen that the Government support key strategic industries in this country and make sure that highly skilled jobs are not lost. I hope that these events will trigger a reconsideration of the Government’s hostility to an industrial policy and strategy. We hope that the Government will get to grips with this crisis. It would be a tragedy for the steel industry if they did not, not only for those who have lost livelihoods but for those of us who wish to make the case for modern economic progress. What can we say about globalisation and trade to a newly redundant 50 year-old steelworker if the Government do not muster all their resources to deal with this challenge?

I have some questions for the Minister. First, when did the Government know about the problems facing Caparo and when did they first know that Tata Steel was planning to cut 1,200 jobs across the UK? What did the Government do to support these job losses and address these issues? What level of production do the Government think is the right size for the UK to ensure a strategic supply of steel in this country? What are the Government doing to ensure that this level of production is maintained? Will the Government accelerate action to support energy-intensive industries to alleviate the excess costs facing the industry? In that context, what will they do in short order to ensure that business rates reflect the current crisis in this industry?

Have the Government raised the issue of Chinese dumping during the course of President Xi’s visit? Have the Prime Minister and the Secretary of State taken all the opportunities afforded by such a large delegation to raise our concerns? Also, within the context of some of the businesses that have fallen behind, does this not offer some reason why we should have broader debtor-in-possession provisions; and why we should consider a different way in which we could muster more time and resources for restructuring? Have the Government considered using the Industrial Development Act? Given that we are potentially amending that in the Enterprise Bill, would the Government consider amending it further in order to do so? It is a measure that we would support.

Will the Government also consider using all the resources of their start-up business loans and other sorts of facilities to create special provision to support those particular areas? Finally, in the case of SSI and Redcar, there are some outstanding issues about pensions. Can we have an assurance from the Government that we will not be picking up the tab for the non-payment of pensions by the restructured industry?

My Lords, this is a worrying time for communities that rely on jobs in the steel sector. That is across all the UK, including—I should add—in Lanarkshire, Scotland. Our hearts go out to the families and businesses involved. We have obviously been in discussion with Tata on an ongoing basis. It is a major business operator in the UK. The derogations that are mentioned in the Statement about industrial emissions are extremely important to it and to its future in the different steel communities in which it operates in the UK.

In terms of strategy, not only was there a summit last Friday—which set up three working groups in absolutely key areas that I mentioned in the Statement—but Anna Soubry launched a metals strategy this week which will work with metals industries right across the board, and that will, of course, include steel.

On the subject of China, the Prime Minister is indeed talking to the Chinese on the subject of steel and the necessary restructuring. Of course, it is not only a matter for bilateral discussion, because anti-dumping is a matter for the EU: 28 countries together can do more. We have actually taken EU action thanks to the UK on rebar anti-dumping, which is an issue between the UK and China. We have a number of groups; we have local task forces now in the affected communities, and I am grateful to the noble Lord for his suggestions.

My Lords, the Statement quite rightly referred to energy costs, which are of the first importance in steel making. Is the Minister aware, however, that it is entirely a result of the misguided energy policy of this Government, which they inherited unchanged from the previous coalition Government, that energy costs for British steel makers are significantly higher than they are for steel makers in the rest of the European Union, and very substantially higher than energy costs in China? In the light of the disastrous news of which we are all aware, will she urgently ask her colleagues in Government to review the suicidal energy policy being pursued at the present time?

My Lords, the energy policies to which my noble friend refers date back to the Labour years and the coalition. We are where we are now; we have paid out £50 million to the steel industry through the special energy provisions that exist. One of the groups—the one on competitiveness and productivity being chaired by my noble friend Lord O’Neill—will look at energy and environmental costs, other regulatory costs, and what action industry could take to drive up productivity and competitiveness, in the light of the playing field that my noble friend has described.

My Lords, Tata’s statement today says that China’s imports of plate steel into the EU have increased by a factor of four over the last two years. Is the Prime Minister raising evidence of dumping with President Xi during his visit today, and, given that the Government’s Statement says that no Government can act alone in this matter, what precise action are the Government seeking from the EU to use the strength of its marketplace to put pressure on the Chinese?

The Prime Minister is talking to the Chinese about this issue; obviously I am not able to share the detail with noble Lords today. However, I will add that we have been active at the European Union level, as I explained last week in answer to an earlier Statement. The Secretary of State will go to Brussels next week to talk to the relevant Commissioners in the various areas, and obviously the issue of Chinese imports, anti-dumping and the marketplace that I have described will be at the absolute top of the agenda.

The European Union can be difficult on state aid. Would the mothballing of a plant or part of a plant fall foul of European Union state aid provisions? Those of us who have represented steel constituencies know that closure is final. Mothballing would give some hope to a community.

There are two questions there. On the first, as I explained last week on mothballing at Redcar, on the business case that was given, the Government did not have realistic confidence that a proposal for taxpayers’ support could be produced. As I am sure the noble and learned Lord knows, individual state aid claims are very complicated. You have to put the proposal together and then go and engage with the European Union. It is difficult to give a clear answer on that one.

My Lords, in the north-east there is also particular concern around young people who are in apprenticeships at Redcar, Hartlepool and elsewhere, and their deep concern that after three or three and a half years they will now have to go back to the beginning. Can the Minister give us an assurance that some of the £80 million will go to assist them to complete their apprenticeships without having to return to the beginning?

Indeed. About 50 holders of apprenticeships are among those made unemployed in Redcar; the task force is trying to make sure that they are transferred elsewhere, and they have already obtained some places. That is exactly the sort of thing that the task force should be helping with at a local level, which is why we are so keen to have this local endeavour in these very difficult circumstances.