Government Contracts: Steel Industry

Thursday 25th February 2016 Lords Chamber

Question

11:14

Asked by

[Lord Hoyle]

To ask Her Majesty’s Government whether, when steel is required for a government contract, they will specify that it be British.

[The Parliamentary Secretary, Cabinet Office (Lord Bridges of Headley) (Con)]

My Lords, the Government are committed to implementing measures that will address any barriers that prevent UK suppliers of steel from competing effectively for public sector contracts in line with EU legislation. All departments are now required to implement the new guidelines on how government buyers should source steel for major projects so that the true value of UK steel is taken into account in major procurement decisions.

[Lord Hoyle (Lab)]

Can the Minister explain why we did not support the proposal of the European Commission to raise the tax on imported Chinese steel to 66%, which not only would have put it in line with the United States but would have brought stability to the British steel industry and security for British steelworkers?

[Lord Bridges of Headley]

The initiative that the noble Lord referred to is one that we welcomed in the sense that it wished to modernise tariff proposals, but we could not accept the removal of the lesser duty rule, which ensures that unfair trade practices are addressed without imposing disproportionate costs. We have also supported other EU initiatives on wire rod, seamless pipes and tubes, and rebar, as regards Chinese dumping.

[Lord Forsyth of Drumlean (Con)]

My Lords, will my noble friend confirm that far more steel is imported from other EU countries than from China, and that if the Government were to do what the noble Lord, Lord Hoyle, wishes them to do, we would have to leave the European Union?

[Lord Bridges of Headley]

Blow me down with a feather: my noble friend is wanting to leave the European Union. That is a surprise at quarter past 11. I am sure that he is right about his facts. The challenge at the moment is obviously Chinese steel. Chinese excess steel capacity is estimated to be roughly double the EU’s annual steel demand and 25 times the UK’s steel production. That is the real challenge we face.

[Lord Morris of Aberavon (Lab)]

My Lords, on the assumption that the Government made speedy and early representations to the European Commission regarding the dumping of Chinese steel, are they satisfied that the Commission has acted effectively and promptly to protect the British steel industry?

[Lord Bridges of Headley]

My Lords, there is always more that we can look towards the EU to do. For example, we are pleased that the European Commission is investigating where there is evidence that state support for steel industries is not compliant, as regards Italy and Belgium. My right honourable friend the Secretary of State for Trade and Industry was one of the signatories to the letter to the European Commission only a few weeks ago that called for further action.

[Lord Razzall (LD)]

My Lords, I shall follow up the remarks made by the noble Lord, Lord Forsyth—without sharing his conclusion. Will the Minister accept that some of our continental country friends seem to be better at protecting their steel industries than we are? I take the point made by other noble Lords on dumping of Chinese steel. Will he also indicate what the Government are prepared to do to meet the requests from the steel industry on energy costs?

[Lord Bridges of Headley]

I shall take the final point first. The Government are addressing the request for energy costs in one of the five prongs of their action to help the steel industry, which we all wish to do. As regards the EU, the noble Lord makes a valid point. I just add that, despite the widely held view that UK public procurement is more open than that of other EU member states, European Commission studies show that UK firms win more than 95% of UK contracts advertised EU-wide.

[Lord Stevenson of Balmacara (Lab)]

My Lords, does this Question not have wider resonance? The Government and public authorities in this country control about 40% of GDP spending. If the Government really wanted to back British industry—including British steel, which we would support—and help British workers, why will they not also ensure that our SMEs have a proper chance to bid for government contracts and require companies that are awarded government contracts to employ high-quality apprentices, as we did for the Olympics?

[Lord Bridges of Headley]

Those are valid observations. The public policy procurement note, which I have in front of me, makes the point that private companies should advertise through the supply chain when those contracts are available and make sure that British SMEs are able to bid for them. The contribution that companies make to apprenticeships is also highlighted in that public policy procurement note.

[Lord Lawson of Blaby (Con)]

My Lords, is the noble Lord, Lord Razzall, not absolutely right: is it not the case that the masochistic energy policy pursued by the British Government at present leads to a carbon price floor five times the size of the carbon price in the rest of the European Union? Is that not crazy? What are the Government going to do about it?

[Lord Bridges of Headley]

That is slightly going beyond my ken, my Lords. As regards the energy costs that the steel industry is looking for, £100 million will be saved over the financial year and £400 million by the end of this Parliament, thanks to the action that the Government are taking to give the industry relief.

[Lord Watts (Lab)]

If the Chinese are found to have been dumping steel in the UK, what action will the Government take to penalise them for doing so?

[Lord Bridges of Headley]

Let us wait and see. These investigations are obviously under way as we speak.

[Lord Berkeley (Lab)]

My Lords, the Government recently announced that the Chinese were going to invest in Hinkley Point power station. Will a condition of that be that Chinese steel and other products are used in its construction?

[Lord Bridges of Headley]

That is a very good point, my Lords. Responsibility for the construction of Hinkley Point C rests with EDF rather than the Government. The project will require hundreds of thousands of tonnes of steel and EDF has made it clear that it expects a large proportion of that to come from UK companies. The construction and operation of Hinkley are expected to create 25,000 employment opportunities and aim to create 1,000 apprenticeships.