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Steel Sector

Volume 768: debated on Monday 18 January 2016


My Lords, with the leave of the House I shall now repeat a Statement made in the other place by my right honourable friend the Minister of State for Small Business, Industry and Enterprise. The Statement is as follows.

“It is with regret that I find myself having to update the House on further job losses in the steel sector. This morning, Tata Steel announced plans to make over 1,000 redundancies across its UK strip business as part of its continuing restructuring plans. The proposals involve 750 job losses at Port Talbot and Llanwern. There will be 200 redundancies in support functions, and Tata has also announced 100 redundancies at steel mills in Trostre, Corby and Hartlepool. This will be a difficult time for all workers and their families. Our immediate focus will be on helping any workers who lose their jobs back into employment as quickly as possible. We will also continue to support the steel industry.

Given the UK’s devolution settlement, much of the support that can be offered both to workers and to Tata in south Wales will come from the Welsh Government. But the UK Government want to ensure that Port Talbot has a commercial and sustainable future, and it is encouraging that the Welsh Government are to launch a task force this week to support those affected by today’s announcement.

I have previously offered our support to the task force chair, Edwina Hart, and will continue to work with the Welsh Government going forward. I therefore welcome the commitment that the First Minister made today to working closely with the UK Government. I can also assure Members that I am working closely with the Secretary of State for Wales, who I know has been in the area today and hence is not here in the House.

It is important to remember that the fundamental problem facing our steel industry is the fall in world prices, caused by the overproduction and underconsumption of steel. No Government can change the price of steel. But we can and are achieving a level playing field for British producers. I can inform the House that the Government have been working closely with Tata to do all we can to ensure a sustainable future for Tata Steel in the UK, both at Port Talbot and Scunthorpe. The Government have offered their assistance to Tata as it seeks to find a buyer for its long products division. It is encouraging that Tata has announced Greybull Capital as its preferred bidder and we remain in close contact with Tata as its commercial negotiations continue. The Government stand ready to play our part to help secure Scunthorpe’s long-term future.

Returning to today’s announcement, the same offer is there for Port Talbot. Tata is currently working with consultants to develop a plan to address the near-term competitiveness of its business at Port Talbot. We and the Welsh Government are in regular dialogue with Tata. This dialogue includes my right honourable friend the Secretary of State for BIS, as well as my officials and me. While the future of Port Talbot must be commercially led, we will help where we can within the parameters of state aid rules.

Last October, the Government held a steel summit at which the UK steel sector set out its five asks of Government. I can report that we have made quick and substantial progress against these asks to ensure a level playing field for our steel industry. The industry asked for lower energy costs. In December, we secured state aid approval to pay further compensation to energy-intensive industries, including steel, to include renewable policy costs. We have already paid nearly £60 million to the steel industry to help mitigate the costs of its existing renewable policies. The latest state aid approval will now enable us to extend the scope of compensation, saving steel makers hundreds of millions of pounds. But we will go even further and exempt energy-intensive industries from most of these costs.

The sector asked for flexibility over EU emissions regulations, and that is exactly what we have secured. Derogations for Port Talbot have already been agreed by Natural Resources Wales. The Environment Agency has accepted Tata Steel’s proposals for derogations for improving emissions from Scunthorpe, subject to a current public consultation. Once approved, this will give Tata a further six years to improve emissions levels from the coke ovens, and both Tata Steel’s major power plants have been included in the UK transitional national plan which the UK has submitted to the European Union. This gives the company until June 2020, a further four years, to meet emissions requirements. These actions will save the industry millions of pounds.

We have also published and further updated procurement guidance for government departments to allow aspects such as social impacts, job impacts and staff safety to be taken into account when procuring steel for major projects. We are the first country in the EU to take advantage of and implement these new flexibilities. In short, there is no excuse not to and every reason to buy British steel.

I have heard it said that the Government have blocked the reform of trade defence investigations; we have not. I can assure you that the Government have been acting decisively to safeguard the UK’s steel interests in Europe. In July and again in November last year we voted in favour of anti-dumping measures on certain steel imports. It was the UK that lobbied successfully in support of industry calls for an investigation into imports of reinforcing steel bar. The European Commission has taken this forward swiftly, including an extraordinary meeting of the EU’s Competitiveness Council, and has agreed faster action. I will be returning to a follow-up stakeholder conference next month where I will push for further progress. The review on business rates in England will conclude this year. Of course, the Welsh Government have responsibility for business rates in Wales and therefore in Port Talbot.

UK steel has today added to its original five asks with two further requests concerning China securing market economy status and funding assistance for environmental improvements, research and development. We will explore both of these with the sector while continuing to drive forward the original five.

As we have seen today, the steel industry remains subject to unprecedented global pressures. While the immediate causes of these are beyond the Government’s control, I can assure the House that we continue to do all we can to help the industry and will stand by all those workers who face redundancy in south Wales and other parts of the United Kingdom”.

My Lords, that concludes the Statement.

My Lords, the devastating impact of job losses in the country as a result of Tata’s announcement of more than 1,000 job losses across Wales, Corby and Hartlepool is devastating news for all of the workers, their families and the close-knit communities surrounding the plants. The impact is a double whammy for Wales because steel is an industry which has contributed significantly to the added value of the economy there, adding several percentage points to GVA figures. Of course, this latest news comes on top of job losses at Tata’s Newport plant last year, along with job losses across the UK announced by a number of operators in September 2015, and the complete closure of the Redcar plant.

Steel is the foundation of many of the UK’s most important manufacturing sectors, including aerospace, defence, automotive and construction. However, the industry suffers from a perfect storm. Countries such as China are engaging in ruthlessly uncompetitive practices which are destroying the steel industry, energy prices are too high and emissions regulations are too restrictive. The Government centrally, although they are doing some work on this, still, perversely, do not require their own contractors to buy steel from the UK. The Minister, in repeating the Statement in this House, for which we are grateful to her, mentioned that there is some progress on these matters, but the general view around the country is that although progress is being made, it has sadly been too little and it has certainly come too late.

Central to ensuring that our steel industry survives and thrives is the urgent need for an industrial strategy. The Chancellor declared recently that Britain would be carried aloft by the march of its makers. But manufacturing exports have slumped and manufacturing output is still below its level of seven years ago, before the crash. There is a lot more still to be done.

I have some questions for the Minister. When did she or her colleagues raise the issue of the dumping of steel directly with the Chinese? Can she give us chapter and verse on that? Can she spell out the support from the UK Government that will be made available directly to the families and communities affected by the latest round of cuts? She said that the Government would help where they can, subject to state-aid rules—but there is a humanitarian crisis on our doorsteps and we really need to see action. What work is being done by the department on the supply chain that supports these companies affected by job losses and, presumably, reductions in activity? Many of these are small and medium-sized companies that help to keep the British steel industry going. What work will be done to support the UK buyers of output from these plants who may well now have to seek alternative supplies on the market?

The steel industry is of vital strategic importance to this country and the Government need to safeguard its future. We are very conscious that there are issues in the market of price and overcapacity, but these have been there for a long time, and we have been raising concerns about the structure of the UK steel industry for most of the previous Government and certainly during this one. Where is the action?

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 sad events will trigger a reconsideration of the Government’s hostility to an industrial policy and strategy. We hope that they 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 their livelihoods but for those of us who wish to make the case for modern economic progress.

My Lords, I am sure that I represent everyone in the House when I say that our thoughts today are with the steelworkers and their families.

A major cause of this, it would seem, has been the dumping of Chinese steel. We are part of the largest trading bloc in the world, and this has been going on for a very long time. What are the Government doing to defend our interests and to fight for British steel in the EU? The noble Baroness said that some things are being done but I think that everyone would agree that we need to do more to mitigate some of the worst problems that we are going through at the moment.

The British Government need to do more, but so do the Welsh Government. My Liberal Democrat colleagues in Wales have called for scrapping business rates on planting in the Welsh steel industry. The Labour Party has criticised the Government in England but seems to have done nothing where it is in charge in Wales.

Finally, one-third of the production in Port Talbot is for the car industry—a highly successful industry. The Minister says that there is no excuse not to buy, and every reason to buy, British steel. So why does she think, given all that she said, it is not being bought?

I start by agreeing with how devastating today’s news is, and I agree with the statement made by the First Minister in Wales, Carwyn Jones. Our first thoughts today are with the families, communities and supply chain businesses that are dependent on steel production in Port Talbot, Llanwern and Trostre. This is a severe blow to the community and to steel production in the UK. Indeed, I welcome the task force that has been set up in Wales today, which will meet this week. That follows the model of task forces set up in other areas, such as Redcar. They have done very good work and are particularly good at focusing locally, not only on issues affecting steelworkers but on businesses in the supply chain, which are obviously vital to future jobs.

It is right to say that we have made a lot of progress since we last discussed this in the autumn. Noble Lords will remember that there were five asks from industry, trade unions and others. There are two more today. We have made substantial progress on four of those five asks, as I pointed out in my Statement. We have not made progress on rates because they are the subject of a current review by the Government. In Wales action on rates is, rightly, for the devolved Administration, as has already been said.

I was asked when the Prime Minister first raised steel in China. I know that he certainly raised the issue of steel when President Xi visited us in October. In Brussels, which I was asked about, we have of course changed our approach on steel. In the relevant committees in July and in November, for the first time we pressed for action and voted against rebar. Individual cases of Chinese and other dumping have been pursued and accelerated. There was a summit of the EU Competitiveness Council, a special meeting that took place entirely because of a request by the Secretary of State to Brussels. I think noble Lords will agree that looking at these things together in Brussels is necessary, and that the action on energy costs and industrial emissions directives has come about directly as a result of that work. These things are difficult, but we have been determined to do a lot and we have been acting in Brussels constructively.

My Lords, from these Benches I first express my sympathy for the workforce, whose jobs are being lost. Bearing in mind what has rightly been said about the importance of Port Talbot for our highly successful motor and white goods industries, I am pleased to hear of the determination of the Government, working with the Welsh Government, to see that Port Talbot has a sustainable and commercial future. I also welcome the specific measures that my noble friend has drawn attention to. However, on the question of rates, although it is true that there is a long-term review in England and that rates are the responsibility of the Welsh Government, surely there is a need for early and specific action in the steel industry on the rates question. Will my noble friend assure me that we will not necessarily have to wait to the end of the year for the completion of the long-term review of rates?

I hear what my noble friend says and completely agree that rates is a vital area. We have three ministerial working groups, set up in October. They are very aware of the importance of rates. My noble friend Lord O’Neill is leading the work stream on productivity and competitiveness. I will ensure that I pass on the comments made on rates.

My Lords, I wanted to hear what the Minister had to say because I was general secretary of one of the unions involved in the steel industry. As the Minister said, it is devastating news, but it is not unusual news for the steel industry. I am reminded of something I said a few weeks or months ago, about when there were 270,000 employees in one company in the steel industry in the United Kingdom, called the British Steel Corporation. Now we are where we are. The figures are abysmal and most worrying. I worried even further when someone said to me, “Keith”—that is my first name—“You must remember that we live in a post-industrial society”. If we are heading down that track—we are rapidly going down that track as far as the steel industry is concerned—frankly, what the Minister and the Government are saying is not good enough.

I am concerned that I do not hear too much from the Minister about what the trade unions are actually saying at the moment. Are they accepting the closures? Are they accepting the fact that there will be fewer than 30,000 people in total manufacturing steel in the United Kingdom? Are they not that concerned—the Minister made the point that she was—that the imports from China and elsewhere are causing havoc in this country? I do not think the news from the Government is good enough, and I hope we get some more positive action from them.

My Lords, I would like to pay tribute to the unions in these very serious steel difficulties. They really have been amazing and shown that they can be extremely constructive. They therefore have been working in the task forces with Tata and other steel producers to try to minimise the problems and difficulties of the steel industry.

It has unfortunately been a long tale of decline, with job numbers halving between 1998 and 2010 and a reduction of around one-third in production in that area. There has been an improvement up to 2014, with numbers up from 33,000 to 35,000, but, of course, we now have the latest set of difficulties.

All sides need to come together. Obviously, we need to pursue the problems in Brussels. We have colleagues in other member states who also have steel industries that are suffering from the effect of China. We have to engage on the China side. In the various working groups, we have to look ahead because steel is an important industrial sector. One of the things we have been looking at, for example, is how the improved procurement rules that we helped to negotiate in Brussels can be used to help British steel go into major projects such as HS2.

My Lords, is the Minister aware of the article in today’s Western Mail by the eminent economist Gerry Holtham and Adam Price? They see the possibility of being able to create a joint public and private sector venture between the Government of Wales and Tata, and because of the high quality and specialist steels that are being made in Shotton, Trostre, Llanwern and Port Talbot, this could be a flyer.

In the past, such investment by government has been allowed in Italy and Germany within European rules. Will the Minister and the Government take this forward in conjunction with the Welsh Government to see if this is a positive way out of our difficulty?

I have not seen the article, but it sounds extremely interesting. I think we have made it clear that we are very keen to work with the Welsh Government on sensible options. We have already shown our readiness to get proposals through and ensure that the state aid rules are not a bar to that.

My Lords, this is a very sad day for Port Talbot. When I first became its MP, 16,000 workers went through its gates every day. There has been huge investment in the harbour, which I had the privilege of opening, and continuous casting. While I welcome the state aid approach of compensation for about 30% of electricity bills, could not the long-standing grievance of an unlevel playing field have been dealt with some years ago?

I also welcome the new guidance on procuring steel for major contracts, but is this another example of trying to bolt the stable door much too late? In short, could not the long-standing problems of the steel industry that we have been talking and reading about have been anticipated many years ago?

This has indeed been a very long-standing issue. As far as I am concerned, I am always “glass half full” and I think we have to look forward to action that we can take together in the EU. We have to look forward to the work that has been suggested by the industrial strategy groups that have been set up on steel, and to the work that the Welsh Government, supported by our Government, can do in Port Talbot in particular.

My Lords, I come from an area which has suffered steel losses in the past. The Brymbo steelworks near Wrexham were closed. I think the noble Lord, Lord Evans, had something to do with that. Shotton had the greatest number of redundancies in Europe at that time. It required a huge effort to replace those industries in order to give jobs to the people who had been displaced.

Will the United Kingdom Government promise to fund to the utmost extent the needs of the people of Port Talbot and surrounding areas—the 10,000 jobs that depend on the steelworks, as well as those of the people who actually work there—to make sure that that part of Wales remains viable and economically successful?

The work we are going to do with the Welsh Government, who lead on these issues for Port Talbot, is incredibly important. In other areas, task forces have come together from all stakeholders and have spent the available money really well, which obviously has to include looking after the people who are made redundant.

My Lords, will the Minister accept the deep frustration that many of us feel—in my case, as a former MP for Neath—who have had close associations with the steel industry and with the Port Talbot plant in particular? We gave warnings many years ago about sky-high energy costs, about Chinese dumping of steel more recently, and about the failure of this Government and their immediate predecessor to tackle the deficit through investment in growth rather than austerity. As a result, there has not been sufficient demand in terms of Government and private capital investment these last six years for British steel, including from Port Talbot. To that extent, the Government are responsible for the catastrophic impact on the local communities of Neath and Port Talbot in particular.

My Lords, I do not think I can accept that, although I know all that the noble Lord did when he was Secretary of State for Wales. There actually was a decline in the steel industry for many years. We have helped to get viable steel operations on their feet. We are dealing sensitively and carefully with the current issues that have arisen partly because of global changes. Consumption of steel, as the House will know, has declined radically and at the same time China has been increasing its production hugely. This causes a unique storm and we are trying to find a way forward in these very difficult circumstances. I think that the Secretary of State and the steel Minister, Anna Soubry, are doing an excellent job in very difficult circumstances.

My Lords, I appreciate the Minister’s recognition that the news we have heard today is grievous for the communities of south and south-east Wales, including Newport, where I was the Member of Parliament. The steelworks at Llanwern are located in my former constituency of Newport East.

Will the Minister be more specific about the measures that she indicated in highly general terms that the Government intend to take to stand by those who have been made redundant? I also echo what my noble and learned friend Lord Morris and my noble friend Lord Hain have said. Surely, the measures to support the steel industry that the Government have taken in recent months, welcome though they are, should have been taken much earlier so that they could have averted the disasters that we now face rather than taking steps simply to palliate them. Will the Minister also say what intention the Government have to act strategically to help the economies of south Wales and south-east Wales to diversify? What will she do to support retraining of those who have lost their jobs in the steel industry and what will she do to support investment to enable new industries and new businesses to grow in the regions affected?

My Lords, there was, of course, a new Government after the election and I have tried to explain what this new Government have been doing in this area. It is important to have a growing economy; that creates jobs in other areas. The noble Lord is right to point to other opportunities. On other occasions we debate the digital single market and all the service industry that has grown so strongly in the UK. That has to be part of the solution to the problems in communities such as those in south Wales that have been so severely affected today and for which we are all so sorry. The task forces that we have set up elsewhere, and that the Welsh Government are setting up for Port Talbot, can, in my experience, make a huge difference.

My Lords, first, I refute the suggestion that the Welsh Government have done very little to help the steel situation in Wales. They have worked very closely with the steel unions and Tata Steel to try to prevent this happening but the writing was on the wall a long time ago. There has been a steel summit and I am very happy to hear that a task force has been set up. While the biggest blow in terms of job losses announced today will be felt at the huge plant at Port Talbot, which is an absolute tragedy for that community, particularly for the workers and their families, we must not forget the impact on plants such as Trostre in Llanelli, which also have a very proud and long tradition of steel making. Will the Minister explain why we should be subject to the whims of the Chinese, who are dumping steel in the UK at below market cost? She talked about a level playing field; it simply does not exist. However, at the same time, we are bending over backwards to give the Chinese massive, costly subsidies for their nuclear ambitions in the UK, which will tie the UK into long-term high energy prices and kill off any hopes of a manufacturing revival in this country in the future.

I very much agree with what the noble Baroness said about Trostre. Indeed, Llanwern, Corby and Hartlepool have also been affected today, so it is not just Port Talbot. Our hearts go out to them. We have taken action on Chinese imports. As I said, we voted last July in favour of anti-dumping measures for Chinese imports of steel wire. Again, in November, we voted for anti-dumping measures. We have changed the paradigm and we have raised the issue with Premier Xi. In ongoing discussions on the special status of market economy status, we have made it clear that while we would like to see China get market economy status in due course, it has to abide by the rules and that, if we give it market economy status—which is for the Commission to decide—duties can also be imposed.

My Lords, it is clear that China is massively dumping and the measures which have been taken so far have manifestly proved insufficient. Those Chinese dumping activities—their industry is largely state owned—impact the whole of the European Union. What further is the European Union proposing to do? What timetable is proposed to stem this manifest dumping by China?

I think I have covered the ground well but there is due to be another summit in February for the EU to look at these issues.

My Lords, the noble Lord, Lord Stevenson, mentioned delays in the Government taking action. Of course, one reason for the delay is the European situation in relation to trade assistance. Can I have an assurance from the Minister that other countries in the EU are taking the same notice of EC rules as is this country? Secondly, in relation to energy costs, why are the Government—as has already been noted—paying the Chinese and the French huge sums of money to build nuclear power stations which will take at least 10 to 15 years to build and, at the same time, are closing down coal-fired power stations, which provide the cheapest form of energy?

My Lords, the EU rules on state aid apply to everybody. Where member states do not apply them, they get taken to the European Court of Justice and there are quite significant penalties and financial implications. That is why steel industries across the EU have found it difficult. These state aid rules can be beneficial in other areas. On nuclear power, we are, of course, looking for investment in this vital industry. It is one of the areas in which the Chinese have indicated that they may invest. I see that as different and separate from steel. If there are problems with steel, we should take action in the steel area.

My Lords, the noble Baroness says that we need investment in nuclear. We actually need investment in steel as well. The Government are guaranteeing £92.50 for every unit of electricity produced at Hinkley Point for the next 35 years. The subsidy will come to £20 billion and the plant will cost customers some £4.5 billion. If we have these gigantic figures for the nuclear industry, what is missing for the steel industry? Is it just a lack of resolve on the Government’s part?

Of course, we need investment in steel in parallel with nuclear. We should look at how Tata has come in and invested in steel in the UK. There is bad news today but Tata has worked well with us in these very difficult circumstances to try to do the right thing and to really improve our offer for steel that can be used in the UK in our car industry—and overseas—HS2 and in all the other very important uses for steel, because I believe that what we need is a market for our goods. That is what the steel industry needs.