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2015 Steel Summit Commitments

Volume 644: debated on Tuesday 10 July 2018

[Sir David Crausby in the Chair]

I beg to move,

That this House has considered progress on 2015 steel summit commitments.

It is a pleasure, as always, to serve under your chairmanship, Sir David. I am pleased to have secured this debate, which comes almost three years on from the 2015 steel summit. At that summit, in the midst of the steel crisis, steel producers, steelworkers, trade unions and parliamentarians came together with Government to discuss the challenges facing the industry and the support needed to at least level the playing field. We were not looking for special favours or advantages, just a fair environment so that British steel makers were not fighting against state-subsidised steel from east Asia or excessive energy costs compared with our competitors in Europe.

My constituents in Redcar felt the sharp end of that battle when the SSI steelworks and coke ovens were closed. Cheap Chinese steel had put the works under strain from falling prices, but it was Government inaction, in the face of pleas from parliamentarians, industry and the Community trade union, that left the works in a battle for survival. The closure wiped out 3,000 jobs and many more in the supply chain, rippling across our local economy.

Redcar is resilient and we are fighting back, but many families continue to struggle, working on lower wages in insecure jobs, working away or not working at all. Many come to my surgeries or visit the local citizens advice bureau, struggling with mortgages and personal debt. I do not repeat that story to dwell on the past, but to highlight why it is so important that the steel industry gets the support it needs to thrive. We cannot countenance any more reductions in steelmaking capacity in the UK after the loss of 175 years of steelmaking on Teesside. We cannot be complacent, as before, about the loss of any more steel jobs.

To return to the 2015 summit, there was a united request in the form of five asks, or five areas where the industry was struggling to remain sustainable, often because we were at a disadvantage compared with our competitors around the world. We were playing fair, but the playing field was tilted against us. I am speaking in the past tense, but sadly not enough progress has been made on those asks since 2015. The playing field is still uneven and tilted against British steel. While the existential urgency of the 2015 crisis may have passed, my town stands as a warning of what can happen if complacency sets in and the industry is not given the support it needs to survive.

On the point my hon. Friend has made about what happened in Redcar, does she agree that the closure of the blast furnace and coke ovens there was an act of industrial vandalism that led to the loss of a strategic asset for our country? Does she also agree that the steel industry needs to be seen as a strategic asset and in the context of our national security?

My hon. Friend is right. It was the second-largest blast furnace in Europe and the coke ovens were fantastic; they were capable of producing much more, including foundry coke, for which there was a huge market. It had a huge role still to play in the British steel sector, and we did not have a strategic nationwide approach to looking at those assets and preserving the value they had for our economy and for the future. I know many hon. Friends here want to contribute and share their thoughts and experiences, so I will not take too much time, but I will just give an overview of where we were and where we are now.

First, I will start with electricity costs. We asked for help with bringing the cost of electricity in line with that of our EU counterparts. In 2015, the Government introduced compensation for energy-intensive industries a few months earlier than planned, but a large disparity between electricity prices in the UK and the EU still remains. It translates into a total additional cost to UK steel producers of around £43 million per year, or around 17% of the sector’s net earnings, which is a significant margin to be losing in excessive energy costs. Europe offers many examples of acceptable state aid solutions to the energy challenge, but the Government have not given any serious consideration to what we can do.

Secondly, I come to business rates, which irk sectors across the UK, not just steel. The sector has put forward a number of proposals, such as removing plant and machinery from business rates calculations or offsetting previous trading losses against future business rates, but change in this area has been met by resistance, even though the sector has committed to reinvesting any savings, which would have a huge impact on local steel-producing regions. That feels like a short-sighted approach from the Government, ignoring a powerful tool for incentivising capital investment, increasing the productivity of the sector and helping to deliver a northern powerhouse boost.

Thirdly, public procurement is another area where the UK has so much potential to support UK steel makers, especially through large infrastructure projects such as HS2 and the Heathrow expansion. I know that British Steel in my constituency has aspirations to win contracts on those projects, and many other colleagues will have similar ambitions for their areas. There has been a close working relationship between the sector and Government on procurement.

Does my hon. Friend agree that the Government have missed a real opportunity for UK plc generally, and for steel in particular, with their decision to refuse the Swansea Bay tidal lagoon?

My hon. Friend makes a vital point, not just in terms of opportunities in that area for the creation of jobs and the boosting of the local economy, but in terms of the huge implications for the steel industry that we know such major infrastructure projects have in keeping that pipeline going.

The publication of an annual steel pipeline to provide early sight of such opportunities for UK producers has revealed over 4 million tonnes of steel requirements in the coming years. The publication of the procurement policy note on procuring steel in major projects has also helped to encourage a more holistic and proactive approach to steel procurement. Despite these steps forward, the benefits of this relatively low-cost way of subsidising UK steel and jobs are not being maximised. The guidance is interpreted differently by different Departments and organisations, and information sharing is still far too limited. Clearer and more detailed data on the amount of UK steel in public projects would be a welcome improvement, to track progress and to ensure it is held up to the light of public scrutiny. Introducing a baseline for levels of steel in UK projects would also help to maximise the benefits to domestic steel production.

Fourthly, trade remedies have been an incredibly important defence mechanism in the battle against state-subsidised steel, which is flooding the market and forcing down prices.

Does my hon. Friend agree that, in the light of the American steel tariffs, there is a real danger that steel that has hitherto been going to the US will be diverted and dumped on to the British market, and that the current UK policy is going in the wrong direction, unlike that of the European Union, which is going in the correct direction?

My hon. Friend is absolutely right; I know colleagues have raised that issue a number of times with the Secretary of State for International Trade. The implications of the steel tariffs that President Trump has announced are not just a direct existential challenge to our steel industry here; the knock-on effect of further dumping from the Chinese market and others into our market is a real crisis coming down the line.

Such unfair trading practices put UK steel at a disadvantage for trading fairly without a single bit of state support. Thanks to work within the EU, dumping methodology has been reformed and a modernised regime has had a big impact in reducing the levels of dumped steel in the EU market. It is a real worry that, when we leave the EU, the UK will not endorse the same kinds of protection and the UK steel market could be in danger of being swamped. The UK Government’s unexplainable opposition to the modernisation package within Europe suggests that they will not introduce the same approach in the UK system post-Brexit. The proposals so far suggest there could be a much more difficult and drawn-out process for initiating defence measures, by which time the damage would have been done.

I congratulate my hon. Friend on securing the debate. As someone from a ceramics area, the issues she is talking about resonate with the industries I talk to. Does she share my concern that not only do the Government seem not to want to commit to the European calculations for dumping, but the introduction of an economic interest test and a public interest test gives further opportunities for Ministers to take away the protections, even if they were to update the methodology themselves?

My hon. Friend is right. It is vital that we all contribute, and that the Government listen to the debate as we produce the legislation and look to leave the EU.

Our fifth ask was on environmental regulations, which is one area where there has been positive progress, allowing more time for specific sites to meet the requirements of the industrial emissions directive. However, one fully completed promise and some minimal progress on others is not a great record, almost three years on from the steel summit.

I congratulate my hon. Friend on securing the debate. Listening to her analysis, a balanced scorecard on the Government’s performance would not show a terribly high score. Does she agree that, three years on from that steel summit, it would probably be a good idea for the Government to convene a steel summit to review how the industry is doing now and set us fair for the future?

My hon. Friend makes an important point. Three years on, it is vital that we look at the crisis we were in, where we are now and the impact of any measures brought in. He is right to put that suggestion forward. I remember his raising it on the Floor of the House at the height of the steel crisis and being met with guffaws and laughter, as if a steel summit would be an irrelevance and meaningless. It actually acted and secured some outcomes. He is absolutely right that three years on is the time for an update and to pull the sector and the industry together to look at what more we need to do.

Our key asks have been put forward again and again in applications for a steel sector deal. This process started in 2016, and we are still waiting. The issue appears to have been kicked into the long grass, and the complete absence of progress on a sector deal in the last 10 months has meant no improvements in levelling the playing field for UK steel makers. The longer we delay bringing forward a sector deal, the more time we lose to prepare the industry for the future challenges.

Those challenges are already emerging, such as in Donald Trump’s decision to impose tariffs on steel and aluminium imports into the US. That underlines what my hon. Friend said about this being an important time to come together and take stock of the implications of the new world that we are in. The tariffs will cause the UK to lose out not just in the direct hit to our exports but, as my hon. Friend the Member for West Bromwich West (Mr Bailey) said, from the diversionary effect as global steel makers look for another market to sell to.

I will finish by talking about why this matters. There are some, including in government, who continue to view steel as a sunset industry that has had its day, and which they would prefer to see in managed decline. That is a short-sighted and pessimistic view of an industry that should be at the heart of the UK’s ambitions for the future. Steel—especially many of the specialist types that the UK manufactures—is a crucial component for so many areas of Britain’s industrial landscape. It underpins our industries, from aerospace to automotive.

Steel has huge future potential. For instance, the Materials Processing Institute in my constituency is working to develop new specialist steels that will form part of the future export market. The industry is crucial to our industrial and manufacturing competitiveness. We have to value domestic production, not through protectionism but by empowering it with a fair playing field.

I secured the debate because progress in supporting British steel has stalled. My constituents and I know too well what complacency can mean for steel jobs in the UK. I hope Ministers will listen and take a renewed interest in backing our steel industry.

It is a pleasure to serve under your chairmanship, Sir David. It was also a pleasure, as is often the case, to listen to the hon. Member for Redcar (Anna Turley), who is my friend and who speaks so passionately on these matters. I congratulate her on securing the debate. It is always good to see such a doughty group of campaigners for this vital industry.

The hon. Lady will know, as will her colleagues, that I visited her constituency and saw for myself the shock caused by the closure of what was once an exceptionally large and productive plant and the concern expressed by people who had lost highly productive jobs that were critical to the UK’s economy. She also knows that the Government, and my hon. Friend the Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington), who has responsibility for the sector, want to do everything that we can to ensure the return of those jobs. She has done wonderful work in her constituency, ably supported by the hon. Member for Scunthorpe (Nic Dakin), other parts of her region and its mayor, to reopen that site as part of the new, low-carbon economy. I am in no doubt about the passion with which she speaks and of what a hammer blow that closure was for employees, their families and the whole region.

The hon. Lady is right to raise what has happened since the closure. That was clearly a momentous time for the industry, and some tough questions had to be answered by the Government and the industry, working together. There have been signs of progress. We have seen a recovery in the world price of steel. The UK has benefited from the decline in the value of our currency, which has made our exports more competitive. However, we are under no illusions about the difficulty of the international market, which we will raise with President Trump when he visits us this weekend.

We are all deeply and profoundly disappointed with the section 232 tariffs. Huge amounts of work have happened behind the scenes to try to focus the US on potentially legitimate concerns about over-capacity production in China, rather than on penalising its closest allies and their industries. Those conversations have happened—my hon. Friend the Secretary of State for International Trade and President of the Board of Trade raised it directly with the US Secretary of Commerce last week. We will continue to make the case for a UK and EU exemption to the tariffs. We have shared legal support on these exemption questions with UK firms and with the industry, and we are pressing hard on behalf of those companies for assurances on the product exclusion process.

Those are the direct impacts of the tariffs. The indirect impact can have a chilling effect on the supply chain, which we are aware of. Indeed, we voted in the EU in support of provisional measures to curb steel imports only last Thursday. We will continue to offer a doughty response, which we must do on behalf of British-based companies.

That 2015 plant closure was such a pivotal moment. We received the five asks of the steel industry, which looked not only at what could be done in the short term but also at the long-term outlook for those companies. A number of changes to the industry’s structure have happened since. Greybull Capital acquired Tata’s long products business, which is based in Scunthorpe and is now part of the British Steel group. The Scottish mills have reopened under the ownership of Liberty Steel, which also bought Tata’s speciality steel business, based in Sheffield and Rotherham.

We should all be pleased to see the Tata-thyssenkrupp venture in Port Talbot coming to fruition. I visited it myself and saw the pride in that long tradition of steelmaking. I pay tribute to the management and the unions, who worked so hard in making that deal happen. Securing those jobs was vital. The deal was accompanied by the decision to invest in the blast furnace. The company will now work to ensure the commitment that as much as possible will be done to avoid any compulsory redundancies until 2026. I have to pay tribute to the pool of highly skilled workers who are dedicated to the future of the industry. We are incredibly lucky to have them.

However, the Government have done our bit, too. We set up our industrial strategy. The hon. Member for Redcar rightly raised energy costs. The Dieter Helm review that we commissioned found that, while our energy companies pay more than some of their European counterparts, it is often because other countries decide to spread those costs to consumers’ bills.

I recommend that the Minister looks at the “Steel 2020” report produced by the all-party parliamentary group on steel and metal related industries. It contains a detailed road map on what can be done on energy, including on wholesale costs, network and transmission costs, energy efficiency aid, reform of the emissions trading system and long-term remodelling. Will she update us on what the Government are doing, and whether she has had a chance to look at the report?

I am happy to read the primary source. I have seen many of those recommendations, which inform our response to the Helm review.

I was making the point that other countries have taken policy decisions to put the costs that would in this country be borne by industrial customers on to household bills. We have ended up in a situation in which some of our industrial energy bills are higher than average, but our household bills are lower than average. Those policy levers are difficult to change; we all support, for example, the energy price cap Bill that we will bring forward later this week.

However, as the hon. Member for Redcar pointed out, we have spent more than £250 million in compensation specifically for the steel sector and other energy-intensive industries to help to mitigate those policy costs as we transition to a low-carbon future. We successfully pressed for the introduction of trade defence instruments to protect UK steel producers from unfair dumping. We set out visibility on the pipeline going forward, which I know was a big ask from hon. Members in the room.

The Government plan to procure construction contracts that will use 3 million tonnes of UK steel over the next five years, which is enough to build 170 Wembley stadiums. I understand the comment from the hon. Member for Penistone and Stocksbridge (Angela Smith) on the Swansea bay tidal lagoon. Believe me, I worked so hard on those numbers, but to build the country’s most expensive ever power station basically to create a couple of dozen jobs was just not economically effective when compared with other opportunities in all our constituencies.

The power of Government procurement should not to be underestimated. Every Government steel contract in England is now required to consider its social and economic impact on local communities and what those decisions mean for the constituencies we are all so proud to represent.

We are grateful for the constructive proposals put forward by the steel council. I asked for guidance on this. The steel council, which I was proud to chair when I was the relevant Minister, met last in June and will meet again before September. It now meets regularly, and that is an opportunity to discuss the current challenges but also for the industry to work together. Historically, members of the industry have not sat around a table and worked together on the outlook and productivity investments; it has had a very competitive mindset. The industry working together and with Government is a very important part of the plan as we go forward.

The Minister is setting out her stall very well, but as she has said, most of the benefits that we have at the moment are down to global changes and the restructuring that the industry has done itself. The assistance on energy prices was in train before the steel crisis in 2015. Since the crisis, there has been some progress on procurement, but frankly the steel sector deal, which the Government have always been positive about and have said is the way to address the steel crisis issues and the five asks, has not yet delivered. Will the Minister tell us where we are on delivering a sector deal for steel and, indeed, whether that will happen? Is it just a case of officials preventing Ministers from doing their job?

No, no—far from it. The hon. Gentleman invites me to move on to the next part of my response, which is about exactly this issue. One of the first parts of the sector deal is getting the sector to work together to say, “What is it that we collectively need going forward?” We had the “Future Capacities and Capabilities of the UK Steel Industry” report produced at the request of the industry; the Government paid for it with taxpayers’ money. It highlighted onshore opportunities that will be worth up to £4 billion a year by 2030. This is about customer demand and substituting for imports specialty steels, higher-quality steels or steels that can support the investments in the offshore wind industry—things that are now being imported. That opportunity exists for the UK plants and it is forming part of the sector deal.

As I have urged hon. Members to recognise before, we should not use the steel sector deal as a measure of how much the Government love the sector. The idea is not to have Government write it and say, “This is what you need to do.” It is for the industry to come together and set out what it needs and wants from Government. We have seen the publication of sector deals that directly benefit the industry that we are talking about. The automotive sector deal was an early one out of the traps. The automotive industry has already increased its use of UK-made content. That went up from 36% previously to 44% two years ago, and the aim is to reach 50% or more by 2022, as a direct result of the sector deal. The construction sector is a vital market for many of the steel products in this country, and we published the construction sector deal last Thursday. It aims to build homes and offices quicker than in the past and it also has commitments in relation to domestic content.

We are absolutely committed to securing a steel sector deal that works for Government, industry and employees. It would be unfair to blame any delay on my hard-working officials. This is about getting the right deal—one that is not just a simple request for money but is saying, “What are we collectively going to do to increase productivity and competiveness, so we can invest again in these steel plants and create jobs in these important areas?”

I do not agree with the Minister’s comments about the tidal bay lagoon, but there are other aspects of UK manufacturing where a sector deal could play a real part. The development of the shale gas industry is one of those. Can the right hon. Lady update us on progress made in maximising UK steel content in the shale gas industry?

That is an excellent point. The hon. Lady will know that I am keen for us to have an energy policy that delivers secure, affordable, low-carbon and innovative energy. I believe that onshore shale gas can play a part in that, and we are soberly going through the process of testing the wells. She raises an important point about ensuring that that work is done using UK steel content. I will take that away for my conversations with the companies, but I did hold a very effective shale industry roundtable, at which I was struck by the number of small companies that are making the pipes and specialty products that rely on UK steel and the opportunities for them, so the hon. Lady makes an excellent point.

I again reassure colleagues here today that work is going on on the sector deal, but we have to encourage the companies that we are working with and that provide so many jobs in the constituencies represented here to think about what they will do. There are positive signs. We are seeing steel companies investing in very good research and development. Companies are bidding for money from our industrial strategy challenge fund—the current wave—for more innovative products, and that is incredibly important going forward.

UK Steel was disappointed with the Government’s response to the sector deal proposals so far—not because there are not weaknesses in what it has put forward that it is aware of, but because the things that were highlighted were not, bluntly, weaknesses. There needs to be a proper dialogue going on that delivers an outcome. How long does the Minister think it will be before we have a sector deal for steel?

I will not speak for the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Watford, who chairs the steel council and is closely involved in the conversations, but I urge the hon. Gentleman to think about the outcome, not the timing. We recognise the importance of the industry. We are setting out plans to ensure that its products can be sold into other UK sectors as part of those deals. I am confident that we will get there, but the steel sector deal has to be a deal that works for the long-term future and is not a quick fix. I think that all of us would say that putting another sticking plaster over the problems that we saw in 2015 would not be the way to secure the jobs of the future. We know that there is a huge opportunity from UK—domestic —clients wanting to buy these products, and we have to help the industry to find a way to get there.

I appreciate the Minister’s response to that question and her update on the steel council; I am glad that it is meeting regularly. I just want to go back to the point made by my hon. Friend the Member for Scunthorpe (Nic Dakin), in his first intervention in the debate, about the option of putting together another steel summit. I feel that the time for that is now. Particularly if the sector deal is struggling, getting everyone together and getting everything on the table might just help to facilitate it.

In my closing remarks, I was going to address the hon. Lady’s point on that, because I think we have made progress in ensuring a sustainable and competitive future for UK steel. However, we cannot be complacent. We know that there are global challenges that affect the sector dramatically. We have made progress on improving the competitiveness and innovation of the industry, and it is really heartening to see that we have these brilliant companies wanting to do the R&D and innovation in the UK. With global or European companies, that has not always been the case: they have made decisions to make certain sorts of products here, but to keep the R&D and intellectual capital elsewhere.

We will continue to work in partnership with the steel sector. This involves not just the companies, but the unions, the devolved Administrations and other stakeholders—in particular, the local communities. I will raise with the Under-Secretary the question of whether the time is right for another steel summit, particularly in the light of international events. Ideally, it would be when we have some progress to report back from the conversations that we are having at a diplomatic level.

I close by thanking sincerely the hon. Members present for raising these issues once again and by assuring them that there is no complacency and we are all dedicated to this vital strategic industry.

Question put and agreed to.

Sitting suspended.