(9 months ago)
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Dame Nia Griffith (Llanelli) (Lab)
I beg to move,
That this House has considered the future of the steel industry in Wales.
It is a pleasure to serve under your chairmanship, Sir Gary. First I want to express my gratitude to Mr Speaker for allowing this debate on the very important matter of the future of the steel industry in Wales, particularly as we were limited by time constraints during our debate on steel four weeks ago.
The news that we have had over the past few months has been devastating, with Port Talbot set to bear the brunt of Tata’s plans to shed 2,800 jobs across the UK. With so many jobs going in such a short time, the effect will reverberate right across south Wales, because the number of people affected will be far greater. That will include all the families of the workers, the loss of work for the contractors and the suppliers connected to the plant, and the massive loss of spending power in the community, with the knock-on effects that that will have on local businesses.
I pay tribute to the trade unions that have been working hard to present alternative plans to preserve jobs, keep primary steelmaking in the UK and facilitate a just transition to the green primary steel of the future. I urge both Tata and the UK Government to look again at those plans.
We stand today at a real crossroads for the steel industry in Wales and the UK. We have the opportunity to be at the forefront of the new green industrial revolution, or to allow ourselves to slide into a second-rate position to be left behind as the only country in the G20 that does not have primary steelmaking facilities. I will return to the bigger picture of steelmaking across Wales later. I know that many of my hon. Friends will talk about it, but I want to focus specifically on the future of the Tata tinplate plant at Trostre in my constituency of Llanelli.
Wales has a proud industrial history. Llanelli has thrived on the production of coal, iron, steel, copper and tinplate. The tinplate industry was already established in Llanelli in the 18th century. By the 19th century, 80% of the world’s tinplate was produced in south Wales, with Llanelli the tinplate capital of the world. Today’s Tata plant at Trostre in Llanelli makes a variety of different materials that go on to be used in a range of products—from the tin can that contains the baked beans that we buy to the compounds used to make the aerosol cans on our bathroom shelf.
Forgive me if I sing the praises of the humble tin can: a practical, versatile and green product. It is eminently recoverable and recyclable. Food in sealed cans keeps for months and does not need to be in the freezer or even the fridge—a great advantage for those who cannot afford to run a freezer or have no access to one. Food in tin cans tends to be cheaper than food in other forms of packaging. Furthermore, those in dire straits can even resort to eating tinned products cold without the need to afford the energy costs to heat them. It is little wonder that in hard times, covid and the cost of living crisis, sales of tinned products have held up. By the way, back in 1935, Felinfoel Brewery in Llanelli was home to the first canned beer in the UK and one of the first canned beers in Europe.
Trostre currently receives its steel from Port Talbot, just 20 miles down the railway track. That makes good economic and environmental sense. Most importantly, Trostre workers know that they can depend on the consistency and quality of the steel that comes from Port Talbot. Tata tells us that when it closes the blast furnaces at Port Talbot in the short term before the electric arc furnace is built, it will import steel to supply the Trostre plant. That will be imported steel made in blast furnaces abroad, so there will not be any saving in carbon emissions—quite the opposite. Processes abroad might be dirtier, and then there are the costs and emissions associated with transporting the steel to Trostre.
The challenge will be to source the appropriate quality of steel to satisfy Trostre’s needs. As Trostre makes a number of products and serves a number of different customers, that means steel of the right quality to satisfy all those requirements. As we can imagine, workers at Trostre are very anxious to know that deals for supplies of quality steel have all been sorted out before anyone even thinks about switching off the blast furnace in Port Talbot. They and I know that the works manager and his colleagues at Trostre are doing all they can to assess potential sources, but inevitably, instead of the security that we currently enjoy with our supply from Port Talbot, people are feeling worried.
Importing steel means that there are far more unknowns. We will be more vulnerable to logistical difficulties or price fluctuations; if there is a shortage of supply, foreign producers may prioritise their home customers. What talks has the Minister had with bosses at Tata about where they will be sourcing the imported steel for Trostre, what guarantees they can give that the quality will satisfy all the requirements at Trostre, when they expect the first shipments to arrive, and what risk assessments and contingency plans they have drawn up to cope with challenges such as price fluctuations or a tightening of the market if other countries want to prioritise their own needs? Will she also tell us how imported supplies will be affected by the carbon border adjustment mechanism?
The Government have promised half a billion pounds for Tata to develop an electric arc furnace. Will the Minister tell us whether there is any conditionality attached to that loan in respect of Trostre? In other words, is its availability to Tata contingent not just on building an electric arc furnace but on securing short-term supplies for Trostre—and, indeed, Shotton—and safe- guarding jobs there?
Jim Shannon (Strangford) (DUP)
I commend the hon. Lady for securing this debate. She is right to say that the job losses at Tata Steel affect Wales, but they also affect the ability of the whole of the United Kingdom of Great Britain and Northern Ireland to manufacture steel for our businesses. Does she agree that the production of British steel, which is of the highest quality, needs greater governmental support to ensure it can compete with steel imports from other nations? Does she further agree that the steel sector can provide employment throughout the UK, and that it should be encouraged to do so?
Dame Nia Griffith
Indeed. As the hon. Gentleman knows, there have been five asks from the steel industry over many years, which encompass those issues.
Tata says that for safety reasons it is not possible to keep the blast furnace going until its proposed large electric arc furnace is up and running. However, there have been other suggestions, including starting with a smaller electric arc furnace, which could be built while blast furnace is maintained. What discussions has the Minister had with Tata about keeping at least one blast furnace going in Port Talbot until an electric arc furnace is up and running?
Liz Saville Roberts (Dwyfor Meirionnydd) (PC)
We are all aware of the risk to the 2,800 jobs at Port Talbot and elsewhere. We need to be highly alert to the fact that the one blast furnace is part of ensuring that there is a just transition for the community. Other communities in Wales are facing losses—including the farming community, which will face 5,500 job losses if the Welsh Labour Government bring in the sustainable farming scheme, and the just transition is exactly the same issue.
I am sure the hon. Lady will join me in asking the Minister and other Governments to ensure a just transition for communities across Wales that have experienced decades of suffering because transitions have not been carried out properly as a key part of ensuring the industries of all our communities.
Sir Gary Streeter (in the Chair)
Order. I remind Members that interventions should be brief and on the subject of the steel industry in Wales.
Dame Nia Griffith
Indeed, we do seek a just transition for the steel industry.
Of course, it is not just Trostre that Port Talbot supplies. If, as current plans indicate, the idea is to close the blast furnaces several years before the electric arc furnace is ready, all the downstream customers will need supplies. The Government could argue that if Tata closes the blast furnace in 2024 or 2025 but does not have an electric arc furnace up and running before 2027, how it bridges that gap, how it sources supplies elsewhere and how it keeps its customers happy are its problem. However, if those supplies are not there, downstream businesses could go out of business, causing huge job losses. It would be catastrophic for us in Llanelli to lose Trostre. Because the Government are putting half a billion pounds in, and because of the worry about job losses, they should seek assurances from Tata about Trostre, which is why I asked the Minister that question.
We accept that the electric arc furnace has a role to play. Indeed, CELSA Steel UK in Cardiff, a very successful business, produces steel from an electric arc furnace. However, there is work to be done to assess the suitability of the steel produced in electric arc furnaces to meet all the requirements of the products produced in Trostre. It is not as simple as throwing any old scrap into the electric arc furnace; clearly, the quality of the source material is important. I understand that a certain amount of metallics are required, which are not necessarily easy to source. We currently export scrap steel, and it is easy to see the logic of recycling that steel here in electric arc furnaces. However, we cannot assume that all that scrap steel will just turn up at the electric arc furnace in Port Talbot or at the one that I understand is planned for Scunthorpe: it must be sourced.
Stephen Kinnock (Aberavon) (Lab)
My hon. Friend is making an absolutely excellent speech. Picking up on her point, there is a need to sweeten the mix in an electric arc furnace with iron ore-based metallics; otherwise, there is no way that we can make the high-value products such as those for the automotive sector and tin cans. Is she aware that only 3% of the world’s iron ore-based metallics are in a pellet form that can be transported across the world and put into an electric arc furnace? Does she therefore agree that by far the best option would be to keep blast furnace 4 going so that we can continue to produce the ore-based metallics for the electric arc furnace, because with 3% of the global supply there is no way that that will be possible?
Dame Nia Griffith
I absolutely agree.
The Minister has previously referred to steel as “infinitely recyclable”. It is indeed a marvellous material, which is so much easier to recover and recycle than many other materials. However, while the lifecycle of a tin can may be a matter of months, steel used in car manufacturing or construction will be tied up in those products for many years to come. I very much hope that we will see an increase in investment in infrastructure projects.
We on the Opposition side have plans to make the UK a clean energy superpower. We have so much potential in Wales, with the prospect of building floating offshore wind farms in the Celtic sea and using Port Talbot and Milford Haven to deliver and service those projects. It is just a pity that through either incompetence or stubbornness the Government have wasted a year failing to get any takers for floating offshore wind because of the unrealistically low strike price offered.
Increased renewables and increased use of electricity mean upgrading the national grid structure. We need investment in our railways, housing, hospitals and so on. Have the Minister or her Department made any assessment of how much steel the UK is likely to need in the coming decade? How much of that steel will be used for short-term products that will reach the scrap market fairly quickly, and how much will be locked in infrastructure that we hope will last for decades?
Returning to the broader picture, while I recognise the contribution that the electric arc furnace can make, it is bitterly disappointing that the Government plans look likely to leave the UK as the only country in the G20 without primary steelmaking. While countries across Europe have been working on greening the primary steelmaking process using technologies such as direct reduced iron and green hydrogen—indeed, Sweden will start production in 2025—the UK Government have not supported any such venture.
There is huge competition out there to woo investment in the green technologies of the future, whether it is the US Inflation Reduction Act or similar incentives in the EU. When we look at the €2.5 billion that Germany has invested in developing green primary steel, hon. Members will understand why we in the Labour party say that that is the sort of sum needed and why, if we were in government, we would look to invest a total of some £3 billion in the industry, rather than this Government’s £500 million.
The reasons why we now face the end of primary steelmaking in the UK must include the failure of the Government to respond adequately to the asks of the steel industry, which it has set out so clearly time and again. We have pointed out, time and again, how much cheaper energy costs are in countries such as France and Germany, while in the UK there have been specific negotiated packages.
Jonathan Edwards (Carmarthen East and Dinefwr) (Ind)
I congratulate the hon. Lady on securing the debate and on her leadership on the issue. It seems that the only hope is to try to persuade Tata to delay some of the implementation of its plans until the change of Government, we all assume, by the end of the year.
As the hon. Lady mentioned, there is an alternative proposal from the Labour party for investment in the steel industry. Does she agree that there is a potential role for the Welsh Government to negotiate with Tata? As they sit on the transition board, they would have close relations with Tata executives to put forward the Labour plan, which would be ready to be implemented this time next year.
Dame Nia Griffith
Anyone who can have influence over Tata would be welcome to make those suggestions.
A moment ago, I was talking about specific negotiated packages that this UK Government have offered. Although there have been those packages, we can see why when steel and high-energy industries make decisions, they cannot rely on limping from package to another but need long-term security with low energy prices, requiring substantial measures from the Government such as massive investment in renewables and reform of the energy market. We in Llanelli look across at IJmuiden in the Netherlands, where Tata has a tin plant works similar to ours. However, in close proximity to IJmuiden, Tata will keep a blast furnace open and develop a direct reduced iron facility. This is the reality we are facing: greater investment for the future going elsewhere. The UK Government need to ask themselves why. I hope that in responding today the Minister will answer my specific questions about the challenges facing Tata’s tinplate works at Trostre, as well as the broader issues facing the steel industry across Wales.
Sir Gary Streeter (in the Chair)
I call Christina Rees —and happy birthday!
Christina Rees (Neath) (Lab/Co-op)
Thank you, Sir Gary—21 again! As always, it is a pleasure to serve under your chairmanship.
I congratulate my hon. Friend the wonderful Member for Llanelli (Dame Nia Griffith) on securing this vital and timely debate. As we contemplate the future of the steel industry in Wales, we are discussing not merely the fate of an industrial sector but the heartbeat of a nation’s economy and identity, and nowhere more so than in the Swansea bay region generally and Port Talbot specifically. The area that includes my Neath constituency and its town has long been synonymous with steel production, its history intertwined with the rise and fall of coal and the resilience of its workforce. Today we stand at a pivotal moment in that narrative, poised to script the next chapter in the saga of Welsh steel.
The challenges facing the steel industry are undeniable. Global competition, fluctuating market demands and environmental concerns loom large on the horizon, yet alongside those challenges lies the opportunity to bring about transformation and renewal. The industry cannot do that against a backdrop of uncertainty and a diminished workforce. The idea that 2,800 jobs will be lost from Tata Steel operations across the UK—the majority from Port Talbot—is unthinkable. The rejection of well thought out union plans for a gradual transition to decarbonisation means the almost immediate closure of two blast furnaces. The single electric arc furnace replacement will obviously produce less carbon dioxide, but also fewer jobs.
First and foremost, innovation must be at the fore- front of our endeavours, from embracing advanced manufacturing techniques to investing in research and development. We must harness the power of technology to drive efficiency and sustainability. Innovation will always be the cornerstone of a vibrant steel industry in Wales, but electric arc furnaces do not produce virgin steel and the difference must be considered. The UK has only two sites that use conventional blast furnaces—Scunthorpe and Port Talbot—which collectively produce 5.9 million tonnes of steel per year and make up 82% of UK steel production. Despite the UK importing most of its virgin steel, the notion that we become a country that produces none is beyond the pale. British Steel, the owner of the Scunthorpe plant, is also planning to replace its virgin steel production by 2025. Should that happen, the UK will become the only G20 country that does not produce its own virgin steel. The consequences need to be fully understood.
Secondly, collaboration is essential for success. Alongside partnerships forged between industry, academia and the community, the UK Government need to step up to the table. A £500 million grant is welcome, but much more can be done on energy prices, R&D support and fiscal leverage. In addition, neither the Welsh Government nor the unions were involved in discussions prior to the announcement of the investment deal. The multi-union plan called for an additional investment of £683 million, involving a two-stage transition that would protect a further 2,300 jobs for over a decade, and not involving a single compulsory redundancy. The plan accepted that one blast furnace, and potentially the coking ovens, would close during a managed transitionary period that involved producing iron for use in the new electric arc to be installed by 2031. The second blast furnace would close in 2032.
It is clear that sustainability must be a guiding principle. We are all aware that the steel industry has a significant environmental footprint, and we cannot ignore our responsibility to future generations. By investing in clean technologies, reducing carbon emissions and promoting circular-economy practices, we can minimise our impact on the planet, while maximising our long-term viability. Sustainability is not just a moral imperative; it is also a business imperative, as consumers and investors increasingly demand ethical and eco-conscious products.
Although I appreciate the need for decarbonisation, we must remember that steel accounts for only 14% of industrial emissions in the UK, which in turn is around only 2% of total national emissions. Importing virgin steel simply transfers the emissions and decarbonisation responsibility. Such overseas manufacturing is also far more carbon-intensive.
Lastly, we must never forget the human element at the heart of the steel industry. Our success is built on the dedication and skill of the men and women who toil day in, day out. As we navigate the challenges of the future, we must prioritise the wellbeing of our workforce today, ensuring fair wages, safe working conditions and opportunities for growth and advancement. A thriving steel industry is not just about profits; it is about empowering communities and enriching lives. Employment in the steel industry is not what it used to be, but a quarter of all steel industry employees work in Wales. As such, job losses are disproportionately felt in Welsh communities.
Jonathan Edwards
I commend the hon. Member on her excellent contribution. Is the reason for the backlash to this announcement not the fact that it appears that the UK Government are providing £500 million to lose 3,000 jobs in Wales, which has been a massive PR disaster for them?
Christina Rees
I completely agree with the hon. Gentleman, and thank him for his important point.
The future of the steel industry in Wales is not predetermined; it is ours to shape and define. By embracing innovation, fostering collaboration, championing sustainability and prioritising our people, we can build a future where Welsh steel shines brightly on the global stage. The story of steel should not feature uncertainty, job losses and community adversity. Let us write the next chapter in the industry’s history: one of resilience, renewal and prosperity for generations to come.
Jessica Morden (Newport East) (Lab)
Happy birthday to my hon. Friend the Member for Neath (Christina Rees). I commend my hon. Friend the Member for Llanelli (Dame Nia Griffith) for securing this important debate. Its importance was highlighted for me and other hon. Members on Saturday, when we marched in solidarity with the workers of Port Talbot and Newport and the unions, which I praise for their work. There was a lot of strong political support on both marches, including from my hon. Friend the Member for Newport West (Ruth Jones).
We should never underestimate just how difficult a time this is for these highly skilled workers and their families. I should point out to the Minister that the average age of a steelworker in Llanwern is now 34, so they are people with mortgages and families to support. That will also be true for those at Port Talbot, represented by my hon. Friend the Member for Aberavon (Stephen Kinnock). In my time as an MP, I have seen year after year just how workers in Llanwern have repeatedly had to adapt and innovate to keep the business alive. I pay tribute to them for that. These are well-paid jobs and, as we often say, for every one job in the plant, there are estimated to be three more in the wider community.
I am sorry that the Government and the company have put the workers in this position. We feel deeply for them and we commend the unions for all they are trying to do, because this is a bad deal for steel. We need the best deal for steel, not the cheapest deal for steel, which is what the Government are offering. As the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) said, no matter how the Government dress it up, they are giving £500 million to Tata to make redundant up to 3,000 people—300 in Llanwern. In doing so, they are in effect ending our history of making virgin steel—we will be the only country in the G7 and G20 not to do so—at a time when we will need this steel to build our green infrastructure.
At a time of global insecurity, we will be reliant on imports. The Secretary of State for Wales claimed on Monday that closing the blast furnaces will make us “less dependent on imports”, when he knows that Tata will have to import steel shipped in diesel-fuelled vessels from India. As the Welsh Government’s Minister for Economy, Vaughan Gething, has said, the UK Government are alone in seeking to propel the steel industry off a cliff in this way. In the Netherlands, Sweden and Canada, we see Governments working in partnership with their steel industry.
The UK Government are not contemplating the multi-union plan, which promises a fairer, just transition to a greener future for the sector. The UK Government shut the Welsh Government and unions out of decision making on this matter, and the Secretary of State has claimed that those proposing credible alternatives to protect jobs and virgin steelmaking for the future are “unconstructive”. These are plans that his Conservative colleagues in the Senedd backed in a vote very recently. Then we have the Secretary of State for Business and Trade calling plans to make up to 3,000 people redundant a “good news story”.
We are now in the third week of the formal consultation period, and Ministers continue to signal that this is a done deal. Will the Minister confirm today that she will not undermine the consultation and that she is still willing to engage constructively with Tata and the trade unions should the opportunity for an alternative approach arise? Will she also set out whether she has had assurances from Tata that the consultation will be given as much time as it needs—beyond the 45-day mandatory minimum, if necessary—for a path forward to be agreed? There is still little detail available about how the funding available to the transition board is planned to be spent. Will she also elaborate on that and confirm whether steelworkers, supply chains and communities that may be affected beyond Port Talbot, including in my own constituency, will be supported?
We have often said this, but we have had 12 Steel Ministers and 14 years of inaction, with this Government vacating their role as the champion for our steel industry in a green industrial future. It is the Labour party that is filling the void of ambition by committing to accelerate a £3 billion green steel fund to invest over the next five years in the future of our sovereign steel industry. I strongly urge the Government to look again at the deal. If they will not step up and look again, they should step aside and let us have a Government who will.
Stephen Kinnock (Aberavon) (Lab)
It is a pleasure to serve under your chairship, Sir Gary. I congratulate my hon. Friend the Member for Llanelli (Dame Nia Griffith) on securing the debate and on making such a powerful case both for the Trostre works in her constituency and for the entire Welsh and British steel industry.
It has been said many times, but merits repetition, that the Port Talbot steelworks in my Aberavon constituency is the beating heart of our community and our economy. For generation upon generation, the people of Aberavon have made the steel that has built our country. Quite simply, steel is who we are. This debate is not just about what steel means to my constituents; it is about our entire national story, because Britain as we know it today simply would not exist were it not for our steel industry. Steel makes everything from the cars we drive to the houses we live in and the offices we work in. It even makes the knives and forks that we eat our meals with, and the humble tin can, as my hon. Friend pointed out.
But our pride never slips into sentimentality or nostalgia. Steel is not a sunset industry, and the steelworks is emphatically not a museum. Steelworkers have experienced enormous technological change over the last 30 years, and every time they have risen to the challenge and adapted to it. When a customer asks for a new grade or quality of steel, our steelworkers deliver it. Indeed, most of the grades of steel being made in the Port Talbot steelworks today did not even exist 10 years ago. It is a hotbed of innovation, and every time I go into the steelworks—I have been many times—I am truly impressed and inspired.
When I go into the works, I also see a workforce that is deeply frustrated. The steelworkers know they are making the best steel that money can buy, but for 14 years they have been competing with one hand tied behind their back. They face almost twice the energy costs of their competitors in France and Germany. Government contracts are going to foreign steelmakers, and Royal Navy ships are being made with foreign steel. Our steelworkers are forced to look on helplessly as other Governments around the world bring forward policies, strategies and billions of pounds of investment to support their steel industries, while our Government sit on their hands. We are not here to plead for special treatment or charity; we simply demand a level playing field.
That brings me to the deal between Tata Steel and the UK Government, which is based on £500 million of taxpayers’ money being spent on making 2,800 people redundant—and that is not counting the huge impact on supply chains and contractors. As I have said, nobody is burying their head in the sand. Everyone can see that our planet is burning, and that customers around the world are looking for zero-carbon or low-carbon products. Even countries such as India and China will ultimately be forced to phase out their blast furnaces. The question is not whether the transition is coming, but how to make it work for jobs, our planet and national security.
It is crystal clear that the plan that is being pushed by Tata Steel and the UK Government fails on three counts. First, it fails on jobs. In the US, Joe Biden’s £290 billion Inflation Reduction Act is creating 170,000 green jobs. In Europe, national Governments are investing billions of euros in decarbonising their single steel plants. The UK is the only country that is throwing thousands of steelworkers on the scrapheap.
Secondly, the plan fails on decarbonisation. The Tata-Tory plan is based on importing millions of tonnes of semi-finished products from India, where steel production is 30% to 40% more carbon intensive than in the UK. The deal is based on exporting jobs from Wales to India, and importing carbon from India to Wales. You could not make it up.
Thirdly, the deal fails on our national security. Electric arc furnaces alone are not capable of making all the grades and qualities of steel that are required to meet the current order book, let alone to embrace the opportunities of the future. The result, in this dangerous and turbulent world, is that the UK will be the only country in the G20 that is unable to make its own steel from scratch. That is madness.
Tata has a choice. It could carry on with both blast furnaces for the foreseeable future, which would mean losing customers, making big losses and eventually closing. Nobody wants that. It could go for the 3 million tonne electric arc furnace-only model, which forces a dependency on scrap steel and on imports while making 2,800 people redundant. Let us call that the cliff-edge option.
The final and best option is to adopt the compelling multi-union plan, which would protect 2,300 jobs nationwide over a decade and would see no compulsory redundancies at Port Talbot. In that plan, blast furnace No. 4 would continue to run until the end of its lifecycle in 2032, and a combination of new technologies, such as direct reduced iron, would reduce reliance on scrap and enable Port Talbot to produce the iron ore-based metallics that are vital for the electric arc furnace to function and deliver the entire customer portfolio. Let us call that multi-union plan the bridge from where we are today to where we need to be.
I urge the Tata leadership and the UK Government to walk back from the cliff edge. Choose the bridge to 21st-century steelmaking. Choose the bridge to a committed workforce that will strain every sinew to deliver. Choose the bridge to long-term commercial competitiveness and profitability. I also say this to Tata: remember that a general election is coming, after which, I hope, Labour can deliver a new Government that will replace the chaos and incompetence with stability, predictability and diligence. In place of the laissez-faire negligence of the last 14 years, it will find Labour’s £3 billion steel renewal fund to drive and support the transformation of our steel industry in a way that sustains jobs and bolsters our national security.
Once a blast furnace is extinguished, that is it—there is no turning back. So I urge Tata not to take any decisions now that cannot be reversed following the general election. Tata and the Government can either take the path of managed decline, or they can get behind the multi-union plan. They can either take the cliff edge, or choose the bridge. Let us hope they make the right choice. We need our steel—let us value and fight for it.
Ruth Jones (Newport West) (Lab)
It is a real pleasure to serve under your chairmanship this morning, Sir Gary. I am very pleased to have the opportunity to say a few words in this debate, and to acknowledge the contributions by my colleagues who are expert in this area. I wish my hon. Friend the Member for Neath (Christina Rees) a happy birthday, and I thank my hon. Friend the Member for Llanelli (Dame Nia Griffith) for bringing such an important debate to this place today.
Last Saturday, as my hon. Friend the Member for Newport East (Jessica Morden) has already highlighted, I had the honour of marching through Newport city centre in solidarity with steelworkers from Llanwern. The strength of feeling among steelworkers and their families, and the wider community across Newport and south Wales, cannot be overstated. My home town of Newport was built on steel, and we all know someone who works in Llanwern, whether they are family, friend or neighbour. We are here not just for the steelworkers of today, but for the steelworkers of tomorrow. We all know far too well in south Wales that once these sorts of industries are closed down, it is very unlikely that the skilled, decently paid jobs they provide will ever return.
Alongside my hon. Friend the Member for Newport East, I made a promise on that march last Saturday to stand up for the steelworkers and ensure that their fight on the production lines for the future of the industry is heard loud and clear here in Westminster. It is vital that we fight for them and all our communities. Wales’s future depends on those of us here speaking out and protecting our steel foundations, whether they are at Llanwern or Port Talbot steelworks, or at suppliers such as Island Steel or recyclers such as Sims Metal in Newport West. Our country relies on the steel industry, and this Conservative Government, with their five Prime Ministers in 14 years, have let them all down.
I do not have time to list all the ways in which this Tory Government in Westminster have endangered the future of steel in Wales, but I will highlight just a couple. Island Steel, a smaller supplier that employs 100 people at Newport docks, regularly finds itself hampered by the current quota system, which locks it out of business. That is yet another example of this current UK Government being unwilling to engage with industry or even to make an effort to understand the impact of their indecision and lack of strategy.
Another area in which I have little faith in the Tories at Westminster is their negotiations for a trade deal with India. In principle, we would all welcome a deal, but the one negotiated by the current Government is years overdue and their record on trade deals is not encouraging. They have repeatedly and consistently sold British workers short and undermined vital environmental and workplace standards that we value here in the United Kingdom. The Labour party believes that trade deals should not seek to undermine our core values, such as workers’ rights, environmental protections and fair trade. The long-overdue deal, of which we still do not have the final details, must ensure access for UK manufacturing or it will be yet another bad deal authored by the Tories and will strike another hammer blow to the prospects of our domestic steel industry. We have had a catalogue of failures and bad, short-sighted decisions from this Conservative Government. They have degraded and endangered the UK steel industry.
I do not want to end on a negative note; after all, this is a debate about the future of steel, not the past. There is hope for steel, because a UK Labour Government led by my right hon. and learned Friend the Member for Holborn and St Pancras (Keir Starmer) would start by earmarking up to £3 billion for investment in green steel alongside the industry. We must retain our strong and viable steel industry because our automotive, defence, renewable and construction sectors depend on it. The next Labour Government will work with, not in opposition to, our steel trade unions. As my hon. Friend the Member for Aberavon (Stephen Kinnock) said, we will build a bridge—not a cliff edge—to a just environmental transition using a blend of technologies. We will not leave anyone behind. We saw what Margaret Thatcher did to our miners in the ’80s. That will not happen on our watch.
Decarbonisation cannot and should not mean deindustrialisation, as we know that that increases costs and pushes the environmental burden on to developing countries. With a Labour Government in Westminster working together with a Welsh Labour Government in the Senedd, we will ensure that steel production continues to play a key role in the growth and prosperity of Wales, for our economy and our people.
Beth Winter (Cynon Valley) (Lab)
It is a pleasure to serve under your chairship, Sir Gary. I congratulate my hon. Friend the Member for Llanelli (Dame Nia Griffith) on securing a debate on this issue, which is so important for the people of south Wales and for the economy of Britain as a whole.
I will limit my contribution to asking the Minister two short questions, based on what the Welsh Affairs Committee heard in its evidence sessions on Port Talbot last month. During those sessions, I asked Tata:
“If the funding were available, would you reconsider your decision?”
Tata’s response was:
“If somebody were to give us money…fine: we can look at other options going forward.”
I also put questions to the trade unions representing the workforce—and I commend the trade union movement in Wales for the work it does in unity with the steelworkers. I asked:
“What levels of investment are needed for the plans and where should that come from? ... Should the Government have a stake in steelmaking?”
In response, the representative of Unite, the main steelworkers’ union, said:
“The need to retain virgin steel production in the UK is too important to be left to the decisions of one multinational company,”
and:
“We think that there is a role for the Government to take a stake in the plant as well”.
My first question to the Minister is this: since Tata said it would be open to other options, have the Government considered that, and have they discussed finding additional funding to save thousands of jobs at Port Talbot? Secondly, in relation to the nature of funding, have the Government considered taking a public stake in the steelworks to ensure the continuation of our virgin steel manufacturing capacity?
In conclusion, as my hon. Friends have already stated—
Stephen Kinnock
I know that my hon. Friend is reaching the end of her speech, but something just occurred to me. I was very pleased to join the Welsh Affairs Committee evidence sessions, and during the second session I asked the Secretary of State for Wales whether the UK Government have attached any strings to their £500 million in the form of job guarantees, and whether he was clear that the electric arc furnace model is going to work without access to iron ore-based metallics. In response, he referred me to the Department for Business and Trade, and said, “Well, they struck the deal, so they should be able to answer your questions.” I wonder whether my hon. Friend might wish to add another question to her list—whether there were any strings at all attached to the £500 million.
Beth Winter
That is an extremely important question. Another question that my hon. Friend raised to which we did not get a response was on the timeframe within which the £500 million is going to be paid. A series of questions were asked during the four evidence sessions that day—if the Minister has not seen the transcript, I urge her to look at it—and a number of them remain unanswered. We have brought some of them to light here today.
My hon. Friends have spoken in much more detail about the devastating impact that the closure of the steelworks in Port Talbot, and many other businesses in Wales, is going to have on our communities. Wales was at the forefront of the industrial revolution—our communities were built on coal, iron and steel—but our history is one of wealth being extracted from our country for the benefit of a few, and that continues. This is a prime example of the lack of consideration given to the people and communities of Wales.
We can and will be at the forefront of change. The multi-union deal—indeed, all the deals that have been proposed by the trade unions—offers a solution. Wales can be at the forefront of a green industrial revolution, where the wealth is not only created in Wales but retained in our communities, so that we no longer suffer unacceptable levels of poverty and deprivation. We are a wealthy nation in terms of our natural resources, and we deserve a different future. We will continue to stand in solidarity with our workers as well as our trade unions to say that we are not going to put up with the continued extraction and exploitation of our communities in Wales. I look forward to hearing the Minister’s response to my specific questions. Diolch yn fawr.
Sir Gary Streeter (in the Chair)
We now turn to our Front-Bench speakers. I call Sarah Jones.
Sarah Jones (Croydon Central) (Lab)
It is a pleasure to serve under your chairmanship, Sir Gary. I am delighted that my hon. Friend the Member for Llanelli (Dame Nia Griffith) was able to secure this debate, and I want to congratulate her on such an excellent speech. She is right: we stand at a crossroads and we risk being left behind. She painted a lovely picture of the tinplate factory—as she knows, that is where my grandfather worked—and how long that has been there.
I also want to mention the other speeches, particularly that of my hon. Friend the Member for Aberavon (Stephen Kinnock), who told us that this is not about the past; this debate is about the future and what the steel industry can become. My hon. Friends the Members for Neath (Christina Rees) for Newport East (Jessica Morden) and for Newport West (Ruth Jones) made, along with others, really brilliant speeches that highlighted the problem incredibly well. I listened carefully to the debate, and I am very proud to have such Members on this side of the House standing up for workers in south Wales.
My main takeaway from considering everything that has been said is: what is this Government for? What are they usefully doing? What is their plan on steel? The challenges we face in Wales have been excellently set out, but let me set out the broader context. The steel industry is badly broken. It has been lurching from crisis to crisis for more than a decade, and there are two fundamental points where the system is not working.
First, the steel industry does not serve the needs of the UK—of our economy or of our security. Companies pursue completely legitimate corporate objectives, but those are no longer aligned with what we need as a country for our security or our economy.
Secondly, the steel industry is not serving the needs of private investors either. Companies are struggling to make money or find opportunities for growth. We have seen investment in the steel industry in other equivalent countries—big investment—but it has been staggeringly low for many years in the UK. It is not working for anyone.
What have the Government done in the face of this challenge? Well, we have the worst of all worlds. They do not know whether they want to be interventionist or not. They do not know whether they want to encourage competition or not. They do not know whether they want to have a plan or not. They dither; Ministers change; obsessions lie elsewhere, so this Government end up treating each crisis in isolation. They support existing players in the market rather than encouraging new ones, failing to tackle the lack of competitiveness and pouring billions of pounds of public investment into the steel industry without any improvement in the sector or any increase in capability. The result has been a significant fall in the amount of steel we are making. What is the overall outcome? Our steel industry is now smaller than that of Belgium, jobs have been offshored and we have damaged our communities.
Labour’s approach could not be more different. We will not pour billions of pounds into an industry without being clear what it is for, what the outcome will be or how the security and economy of the UK will be enhanced. We will not stifle competition; we welcome competition. We will go after new entrants to the market to encourage investment. We want the UK to be the most attractive country in western Europe to invest in steel. Labour’s £3-billion investment in steel will unlock billions of pounds of private sector investment. We will not just shore up a broken model, as this Government are doing. We will not dither. Our industrial strategy will clearly define the objectives for UK growth. We will identify the space in which UK national objectives align with corporate objectives, and we will be agile enough to respond to the different scenarios facing the industry by the time this wretched Government have finished their work.
Labour also has a commitment to primary steel making, unlike this Government. We will not jeopardise the security of our nation.
Jonathan Edwards
This is a genuine question—I am not trying to catch the hon. Lady out. As I alluded to earlier, there will be a change of Government before the end of the year and the hon. Lady will effectively be the Minister. Are the Labour Front Benchers now in a position to negotiate directly with those steel producers about the plan that will be in place in a year’s time? They are essentially a Government in waiting, are they not? Are those negotiations happening, or is there no chance of them happening at all?
Sarah Jones
Obviously, we need to wait and see if there is a change of Government, and we would not assume that. Many of us are in constant conversation with Tata and the unions about the way forward, and we are also talking to the Government about a different approach. We are doing everything we can from an Opposition point of view, but obviously the Government hold the reins at the moment.
Holly Mumby-Croft (Scunthorpe) (Con)
The hon. Lady makes mention of talking to Tata, and presumably that has been ongoing for some time. Can she be very clear whether her understanding is that Tata would have removed all its UK-based jobs had it not been able to reach a deal with the Government for some support at Port Talbot?
Sarah Jones
That is not my understanding—no. What we are trying to focus on in any conversations we have about any industry on steel is what the future is and where we go from here—that is the important question.
My advice to the Minister is to go to the hon. Member for Ashfield (Lee Anderson) and talk to him about when he worked down the mines, and what happened to his communities when the mines shut—the cliff edge, the redundancies, and the closure of all the community assets that went with it. That is what we risk doing in Port Talbot with the cliff edge that we face—nearly 3,000 jobs, as well as the huge knock-on impact of one job in the plant linked to three jobs in the community. Let us not lose 3,000 jobs in Port Talbot. Do not spend half a billion pounds on that. Let that not be the Government’s legacy.
It is not too late; there is an alternative that we could all work towards. The multi-union plan helps us to transition in a way that protects jobs. That is what the Government should be talking about to Tata. It is not too late for the Government to have a steel strategy, to spend taxpayers’ money in a way that works for the UK, our economy and our security, and to listen to their own work, if not Labour’s. The Government’s 2017 review, “Future capacities and capabilities of the UK steel industry”, identified the barriers to growth: supply chains, competitiveness, skills, and research and development capability. Has the Minister read that? What is the Government’s response to that review from 2017? It could do with an update now but the basics are there. The Harrington review is clear:
“The reality is that many of our competitors chase investments via their industrial strategies backed by substantial government support…The UK needs to respond.”
Has the Minister read the Harrington review and what is the response on steel? What is the Government’s steel strategy?
Ministers talk about how important scrap is going to be, and of course it is for electric arc furnaces, but how are they incentivising measures to keep our scrap here rather than exporting it, which is currently the case? Ministers talk about how we need new technology, but electric arc furnaces are not really the new technology any more—they are years old. What are we doing to take us towards a direct reduced iron facility in the UK using hydrogen? What is the plan? What is the plan to grow the steel industry and where is the ambition? What are the Government doing about carbon border adjustment mechanisms? The steel industry will be exposed to unfair competition, so what is the Minister going to do about that? What is the plan on skills, and what is the Government’s view of the multi-union plan for steel in Port Talbot?
Many of the manufacturing industries that I meet across different sectors are at a crossroads. Bills are high, there is no strategy to support them, they are reducing their output and they are struggling to find people to work with them. The steel industry in Wales is a case in point; the Government’s last-minute, chaotic deal was a masterclass in how not to run the transition. Members across the House are worried about the future of the UK steel industry. Members across the House do not want thousands of steel workers to lose their jobs.
Stephen Kinnock
My hon. Friend is summarising the discussion extremely well. I declare an interest as a member of the transition board. During the board’s discussions, we talked about what the vacancies looked like in the labour market in south-west and south-east Wales, and the vast majority of vacancies are in the retail and healthcare sectors. Those are really important sectors and really important parts of our economy, but does my hon. Friend agree that there is not really a connection between the skills and experience of the men and women who have worked in the blast furnaces, for example, and those required to fill the vacancies in the labour market outside those steelworks, and that that is extremely worrying?
Sarah Jones
My hon. Friend makes a really good point, which is why we keep coming back to this cliff-edge approach and saying that it is not the way to transition. If we think about south Wales and the Celtic sea, we think about the huge opportunities with an industrial strategy and industry working together with Government, including the jobs and growth that we could create, but do we have any of that under this Government? No, because they do not even have the starting point of a plan for steel.
Members across the House do not want to see this country becoming the first developed country in the world without the capacity to produce primary steel. Is the Minister concerned about our defence capabilities if we lose the capacity to make steel here from scratch? Does she think that the Government’s plan is really money well spent? Can she answer the question that was originally put today: what conditionality has been placed on this deal? We keep asking for the answer to that question, but we have yet to receive it.
Labour will have clarity of vision on steel. We will invest to unlock private sector investment and we will work hand in glove with the private sector. We will use our flagship policies—the national wealth fund, GB Energy becoming a clean energy superpower, grid reform and an industrial strategy—to make the UK a place to invest in, not a place to leave.
Once again I thank my hon. Friend the Member for Llanelli for making such a brilliant speech today and I also thank all the Members who have contributed to the debate. I hope that this debate serves to raise the Government’s game, but Labour stands ready to step in if it does not.
The Minister for Industry and Economic Security (Ms Nusrat Ghani)
It is an absolute pleasure, Sir Gary, to serve under your chairmanship.
I congratulate the hon. Member for Llanelli (Dame Nia Griffith) on securing this important debate and on speaking so powerfully on behalf of her constituents, many of whom, as she said, are directly affected by the proposed closure of the blast furnaces at Port Talbot. It was lovely to have on the record the importance of the history of steelmaking, especially the creation of tin cans and canned beer, which is something new to me that I will try to take forward somehow.
All hon. Members here in Westminster Hall today have recognised how vital it is that we have a competitive and thriving steel industry, not just for jobs at the Port Talbot and Trostre plants but because of how important steel is to the broader Welsh economy and its future. I thank hon. Members for their valuable contributions to this debate. It is unfortunate that the hon. Member for Croydon Central (Sarah Jones), the Opposition Front-Bench spokesperson, had to make it so political, but I will try to address as many of the points that have been raised as I can in my reply.
First, however, let me start by expressing my heartfelt sympathy for the hardworking employees across Wales and the rest of the United Kingdom who are affected by Tata Steel’s announcement. Undoubtedly, these are challenging and turbulent times for everyone involved, not only the workers but their families and the communities in which they live. Steel has played a pivotal role in modern Welsh history and Welsh people take immense pride in their industry and workforce. This Government are working hard to secure a long-term sustainable future for Welsh steelmaking and to grow the legacy of this cornerstone industry.
The concerns expressed throughout this debate are indeed our concerns; they are shared by hon. Members across the House. They have been expressed by the Government in our negotiations with Tata. We are indeed holding Tata to account. The transition board has been mentioned and we are ensuring that the transition is managed properly, so that every employee receives the support they deserve.
That is why the Government are making a significant investment of £80 million towards the dedicated transition board; Tata is also contributing £20 million. The board includes representatives from this House, the Welsh Government, the local council and other key areas to ensure that the local community is well represented and supported through this period of change.
In addition, Tata Steel has committed a further £130 million towards a comprehensive support package to assist impacted employees. This Government are indeed working hard to ensure that help and support are there for those who need it throughout this disruptive period.
I will be present at those transition board meetings, as will the unions, which I meet regularly. In fact, I believe I met the unions just this week. I forget exactly when, because my weeks blur into one, but regular meetings with the unions are taking place. The point about ensuring that we are involved in constructive dialogue stands, is noted and is on the record. At the same time, however, we must not forget the context that led Tata to make this decision, because the alternative, regardless of the politics being played out, could have led to no steelmaking at Port Talbot.
Dame Nia Griffith
Does the Minister recognise that many of the investment decisions have been taken because over the past few years the difference between energy prices here in the UK and in other countries across Europe, such as France and Germany, have had a significant impact?
Ms Ghani
The hon. Member always makes very thoughtful interventions. It is true that energy prices have spiked, partly because of what is happening in Ukraine, and that is most definitely a challenge, but the support that we are providing Tata is the largest grant that has ever been made available to the steel industry. That was not done under the Labour Government, but under this Conservative Government providing the widest and deepest level of support to the steel sector.
Dame Nia Griffith
Does the Minister acknowledge that the issue of energy prices pre-dates the events that happened in Ukraine two years ago?
Ms Ghani
Energy prices are a component. There is also the challenge that customers and users are seeking cleaner steel and the challenge of managing blast furnaces that are coming to the end of their life. It is a complicated scenario, but, because of the support that we have provided and the transition board that is focused on supporting the staff, there will continue to be steelmaking in Port Talbot.
Holly Mumby-Croft
Can I be clear in my understanding? In the negotiations with Tata—my hon. Friend has talked about the £500 million support package—did the Government get a deal, an understanding, some certainty over when the blast furnaces would be switched off as part of that deal?
Ms Ghani
My hon. Friend is far more knowledgeable on steel plants and steelmaking than I could ever be. The discussions continue. There is a consultation taking place. I was with the unions this week. They will continue to push their plans, which Tata has made clear are neither credible nor economically viable. But within those plans there is a proposal that electric arc furnaces will be upstream, not years away but in a couple of years’ time, which also gives assurances to the supply chains. My hon. Friend knows that the negotiations continue with British Steel and she will probably want to intervene on me later. A huge amount of support was provided by Tata and the transition board, which makes this a far easier programme of work to manage.
Tata has seen a decade of financial losses, with the Port Talbot plant reportedly losing £1.5 million every day. As I mentioned earlier, those challenges stem from complex international dynamics. China’s long-standing practice of flooding the global steel market with subsidised products has been a significant factor. Despite our efforts to mitigate the impact of cheap imports through domestic measures and challenging unfair practices internationally, we cannot ignore the harsh economic reality.
Ms Ghani
I will in a moment. Private companies in the UK steel industry are facing immense difficulties in turning a profit. In fact, without the opportunity to transition to a modem electric arc furnace, the existence of the Port Talbot plant would have been in jeopardy. I cannot stress that enough.
Sarah Jones
On the point that the Minister makes about China, we know that the cheapest steel from China has been a factor, but major importers to the UK are western European nations: the Netherlands, Italy, Spain and Germany. We are not competing with them, either. There is a fundamental problem in the way that we run this economy, which has meant that our industries cannot be competitive when others in the European Union can be.
Jessica Morden
On the issue of competitiveness, we pay 50% more for our energy costs in this country than they do in Germany. The German Government are putting around £2.6 billion into helping the industry transition. That has a major effect.
Ms Ghani
I will go on to answer that point. We have provided support for the energy costs of high-energy industries, and the supercharger initiative is coming down the line, but I will reflect on that point shortly.
The reality is that the Port Talbot plant would have been in jeopardy. Its closure would have had devastating consequences for the town and would have posed a serious threat to the UK as a whole, endangering the 8,000 jobs provided by Tata Steel across the country and numerous small businesses in the steel making supply chain.
Ms Ghani
I will in a moment.
I am on record as having had a regular, constructive relationship, so it disappoints me when Members come to this place and do not accept the reality of what was taking place in Port Talbot. If we had not provided support—the biggest support we have provided to the steel sector—there would have been a devastating effect on the entire 8,000 jobs.
Holly Mumby-Croft
I asked the shadow Minister whether all the Tata Steel jobs in the UK would have been at risk if a deal was not done at Port Talbot—presumably, that is where the “5,000 jobs saved” figure comes from. Will the Minister be very clear that her understanding is not the same as the shadow Minister’s understanding? I think her understanding is that all 8,000 jobs would have gone.
Ms Ghani
I thank my hon. Friend for putting that on the record. I am not sure what evidence the hon. Member for Croydon Central has that the plant would not have been under threat. When Tata circulated information prior to our debates or made announcements, it said that there was an absolute threat to Port Talbot and the company. The reality is that if we did not provide that support, there was a risk of losing all 8,000 jobs.
Stephen Kinnock
Surely when the Government entered into a negotiation with Tata Steel, which is highly experienced in the business of negotiation, they considered the possibility that a gun was being held to their head, and that Tata Steel would of course make threats about total closure because that would strengthen their negotiating position. Were the Government completely naive or just incompetent when they went into a poker game dismissing the possibility that they might be getting bluffed?
Ms Ghani
The hon. Gentleman knows better than most that these conversations and negotiations have been going on for years. The Labour party had an opportunity to invest in the blast furnaces when it was in government, and it did not do so. He also knows that the blast furnaces are coming to the end of their life, so a decision would have to be made at some time. Tata could have decided to exit completely, which would have resulted in a loss of the 8,000 jobs and certainty in the supply chain. The hon. Gentleman knows that, because he had I have been at meetings with the unions and at the transition board. I know it is very difficult when there are potential job losses in one’s constituency, but the reality is that the model was not working.
Before I give way to the hon. Member for Croydon Central, let me say that Opposition Members constantly want harder, greener net-zero policies, and this is what happens when we flow those through. Customers—end users—want cleaner, greener steel that is made in electric arc furnaces, and this is the outcome of that demand. The reality is that, without the support, there would have been a high risk of Port Talbot and Tata no longer producing steel in the constituency of the hon. Member for Aberavon (Stephen Kinnock).
Sarah Jones
The Minister is being very generous in giving way. I want to return to the point about whether it was this deal or the end of everything. If the Government had paid attention to their own report in 2017, which said, “Here are the problems with the steel industry: the supply chain, skills, R&D and transition,” and responded with a steel strategy, Tata would not hold all the cards and would not be able to say, rightly or wrongly, “It’s all or nothing.” We would not be in this situation. But the unions are supporting a reasonable deal that has a calmer transition and would not lead to job losses. Does the Minister think there is merit in that union plan?
Ms Ghani
I will go on to reference that, but not all unions subscribe to the plan, as the hon. Member knows. It was put forward by a collective, but not by all of them. Tata has been clear that keeping open a blast furnace for a very narrow period of time while opening up electric arc furnaces, which will provide the certainty that we need so that we can use scrap steel in the UK, is neither credible nor financially viable. Keeping a blast furnace open also creates difficulties around security and health and safety.
The negotiations continue, and a consultation is taking place. I was asked about what I am doing to ensure that Tata is observing the parameters of that consultation. The transition board is in place, and our focus is on ensuring that the consultation is as wide and deep as it can be, and that the transition board can do the job that it was set up to do, with huge sums of money.
I have already mentioned, and I cannot reiterate enough, the threat that the Port Talbot plant was under. We recognise the vital importance of the steel industry to the community’s heritage and identity. As I have mentioned, the Government have committed £500 million —the biggest sum ever invested in the steel sector—as part of a total investment of £1.25 billion to ensure the future sustainability of Port Talbot steel. That is what we have been able to do, and we should reflect on that. The investment is a huge step towards fortifying UK steel. Sustaining the blast furnaces would entail significant additional losses for the company and compound its current issues. Moreover, as the hon. Member for Llanelli knows, the UK’s blast furnaces, such as those in Port Talbot, are approaching the end of their operational lifespan.
Stephen Kinnock
The Minister keeps saying that the blast furnaces—plural—are reaching the end of their lifespan. Yes, everybody agrees that blast furnace No. 5 is very close to the end of its lifespan; that part of the heavy end, with the coke ovens, should shut down, because the investment does not wash its face. The lifespan of blast furnace No. 4 is until 2032. It does not require that additional investment. I would be grateful if the Minister would stop saying that both blast furnaces are reaching the end of their lifespan.
Ms Ghani
The hon. Gentleman has been at the same meetings as I have, so he knows that the blast furnaces cannot be going if we are to transition in a period of time to having the electric arc furnaces up and running. However, I know that conversations are taking place with the unions, because I spoke to them this week. They are continuing to put their case forward, which is why a consultation is taking place. The hon. Member also knows that we need to give those conversations time to be followed through.
Stephen Kinnock
On a point of information, the multi-union plan is based on a 1.5 million tonne electric arc furnace. Nobody is denying that electric arc furnaces should not be in the mix. We fully support an EAF. We need a 1.5 million tonne EAF, running alongside blast furnace No. 4, not least because that blast furnace could then produce the iron ore-based metallics that are a vital part of sweetening the mix for the electric arc furnace. That would allow us to continue to deliver the current customer portfolio and be ready to embrace the opportunities of the future. I urge the Minister to recognise that we want an electric arc furnace; it is just that a 3 million tonne electric arc furnace is madness.
Ms Ghani
Three million tonne electric arc furnaces do exist in other parts of the world; it is not a unique capacity of arc furnace. I spoke to the unions on Monday, so I know that they are continuing to put their plans forward. Let us see what happens in the next few weeks.
I think everyone recognises that a transition has to take place. We have talked not only about supply chain resilience, but about how we can use scrap steel in electric arc furnaces as technology moves forward. Tata has confirmed that it will observe 90% of its supply chain contracts.
Holly Mumby-Croft
Has the Minister’s Department carried out any work on the quality of scrap in the UK? I keep hearing about tonnages of scrap, but I do not think that anyone knows—or perhaps they do—what that scrap is made up of or whether it is suitable to go in electric arc furnaces.
Ms Ghani
My hon. Friend raises an important point. UK Steel and a number of other umbrella organisations have done a huge amount of work in this space, including with universities in Wales, and they have huge confidence that we could retain most of the 11 million tonnes of scrap steel that circulates in our economy and the 8.2 million tonnes that is exported overseas for use in the electric arc furnaces. Technology will move forward as well—it never stands still—but Tata is confident that it can meet 90% of the contracts it has in place at the moment.
Sir Gary Streeter (in the Chair)
May I make an observation? It is helpful if the Minister can respond to one intervention before people bounce up and down for the next one. Let us take it calmly.
Sarah Jones
It has been a while since I bounced up and down, Chair; I am too old for that. Is the Minister exploring incentives to keep scrap steel in this country? Because at the moment we export it all. Is she looking at VAT relief, tariffs or restrictions to help that process?
Ms Ghani
I will make some progress before I take any further interventions. If the hon. Lady paid more attention to the business model, she would know that we cannot use more scrap steel in the UK economy because we do not have the capacity. But we will with the electric arc furnaces, which will be the dynamic change that is definitely needed.
Furthermore, by reducing our reliance on raw materials such as iron ore and coking coal, electric arc furnace technology offers a more sustainable alternative. Unlike blast furnaces, electric arc furnaces use scrap materials that are readily available—as I said, we have around 11 million tonnes circulating—from abundant domestic sources in the UK. In fact, the UK ranks among the top exporters of steel scrap globally, second only to the United States. Leveraging our ample supply of steel scrap for electric arc furnace production enables us to create new steel products locally, supporting British and international manufacturers alike. Every tonne of steel scrap that is sourced domestically diminishes our dependence on raw material imports from overseas countries, none of them near neighbours.
Wider support for the steel industry was raised in the debate. More widely, we are backing UK-made steel and, crucially, we are backing it in the right way, investing hundreds of millions of pounds to help the industry to thrive in increasingly challenging global markets. We are launching initiatives such as the British industry supercharger, which reduces electricity costs for the steel industry and other energy-intensive sectors, bringing them closer in line with the charges of other major economies. That is complemented by the £730 million in energy cost relief given to the steel sector since 2013. We have given specific support through our energy bill relief scheme and energy bills discount scheme.
We are, then, ensuring the resilience and prosperity of the UK steel industry in the face of increasingly competitive global markets. This work is preparing UK steelmaking for the coming years, but it is not the final word in future-proofing the industry. The SUSTAIN future manufacturing research hub, which is led by Swansea University, is the largest fundamental research activity centre working right now to decarbonise and improve the efficiency of steelmaking in the UK. I believe it is also looking at the quality of scrap steel and new technologies to ensure that we can make even more products using steel in the UK.
Other points were raised by the hon. Member for Cynon Valley (Beth Winter), who serves on the Welsh Affairs Committee. I will go through the transcript from that Committee; I am across most of the issues raised. She asked about an unlimited budget; I am not sure that having an unlimited budget is a good use of taxpayers’ money, nor does it answer the question about the demands of customers looking for cleaner green steel.
A question was asked about absorbing further technologies. We are looking at electric arc furnaces at the moment, but that product is just the first step. As other technologies become commercial, they could be considered in future. I thought the question about our taking a stake in the company was curious because that is not something that we do. Regarding the condition on the grant, the consultation is taking place, and agreements are still being finalised and will include appropriate conditions on the grant. That is why the transition board is vital to that conversation. The grant will be paid in arrears against set milestones for the build of the electric arc furnace.
Beth Winter
I am not sure you have answered all the specific questions from the Opposition. You made a comment earlier about the consultation process that left me slightly confused. You met the unions on Monday and said you want to wait to see what happens in the next few weeks. Is this a done deal—or does the consultation process actually have some teeth in terms of potential outcomes? The unions are pushing the multi-union deal. You met them this week and just intimated that we should wait to see what happens in the next few weeks so—this is my understanding of a consultation process—are you still open to alternative options? Tata may not be, but the UK Government could be, just as the Labour party has proposed if and when we get into government.
Sir Gary Streeter (in the Chair)
Order. That was another long intervention. I remind the hon. Lady that any reference to “you” is a reference to me. I am certainly open to further negotiations, but that does not really matter.
Ms Ghani
This is a decision for Tata to take. It has made it clear that the offers put forward by the unions are not really credible, because it does not think they enable a transition without a huge amount of losses, so they are not financially credible. However, the consultation is taking place. It is not that I just met the unions this week: I meet them regularly and obviously I attend the transition board as well. The consultation is to ensure that Tata can make the right decision, and one would hope that it does that in consultation with the unions and with their overall support, accepting that it is incredibly challenging when we are talking about any level of job losses.
Holly Mumby-Croft
The Minister says it is a decision for Tata to make, which I absolutely understand, but as the UK Government are putting in half a billion pounds of funding and investment support, do we not have some say in that decision as well?
Ms Ghani
We cannot force Tata. We put the support package in place when Tata said that it was struggling and making losses of over £1 million a day, but we cannot insist that Tata continues. We have provided an offer of support, and we want to ensure that the least amount of people are impacted, that the transition board provides support for those impacted, that supply chains continue to be resilient, and that any decision Tata takes to transition is one that meets the framework it puts forward. For example, if Tata plans to continue with its plan for a 3 million tonne capacity electric arc furnace by 2027, we need to ensure that all the milestones are met.
I want to touch on the issue of procurement, which we really have to address. First, less than 1% of UK steel is needed by the defence industry, and it has nothing to do with Port Talbot. This Government have implemented the procurement pipeline, which I was committed to doing when I became the steel Minister, to encourage our steel producers to access more contracts. In the last reporting year, there was an increase in the value of UK-sourced steel, from £97 million to £365 million. It is important to put that on the record, because Ministers say that they will try to increase UK procurement and we have most definitely done so.
I am worried that we are going to run out of time. The reality is that without our support there would have been a serious conversation fundamentally about the loss of 8,000 jobs at Port Talbot. I appreciate that the Opposition cannot understand the realities of business, but under Labour employment in the UK steel industry was cut back by more than half, or 40,000 jobs. Obviously, the Opposition do not appreciate the number of jobs that we hope to have saved.
We understand that Tata’s announcement will come as a heavy blow to the people of Port Talbot, but I recognise that everyone present accepts that we cannot stop the clocks. Technology has moved on. There has to be a transition, and this is a transition in which the majority of jobs will be supported with a substantial sum of money, and of course by the transition board as well. The transition we are talking about is one that enables us to adopt new technologies, with even more allowed to be adopted further down the line. It prevents the further loss of profit and prevents a dependence on imports going forward because we can use scrap steel within our own economy.
I assure the hon. Member for Llanelli that we are committed to working with Members throughout the House to realise a brighter future for our steel-making industry. If the options proposed by Opposition Members—whether it is the £28 billion or the £3 billion—were seen as serious and credible, I am sure that Tata would have taken heed of those support packages. Obviously it thought either that they were not credible or that they would not enable it to continue to do what it wanted—to transition to electric arc furnaces—and that they could have meant even more job losses in Wales and across the UK.
Stephen Kinnock
The Minister is being generous in giving way. She said that the Tata plan would enable us to be open to new technologies. In fact, the opposite is the case because the 3 million tonne electric arc furnace negates the possibility of direct-reduced iron capability, of an open slag bath furnace and of a plate mill; the plan is closing down routes to other technologies, not opening them up.
Ms Ghani
We can look at the reality of a DRI plant at Port Talbot, as well as examples across the rest of the world. A DRI plant requires even fewer people. I was looking at a plant in Texas that ended up having a 2 million tonne DRI plant, and it only requires 190 jobs. It is possible to transition; the opportunity to transition is there. There is often talk of hydrogen. That technology has not been tested to the capacity needed for this particular plant or for the levels of steelmaking that we need in the UK.
Let us deal with the matter in real terms. These conversations have been going on for years. I have spoken to the hon. Member for Aberavon, who represents Port Talbot, and I know that we could have continued the conversations and had a cliff edge, with Tata leaving; or we could have come up with the biggest settlement for steel and a consultation to make sure that the least amount of jobs are impacted—and that is going to provide certainty and security for steelmaking at Port Talbot for years to come.
I fear I have run out of time.
Sir Gary Streeter (in the Chair)
Dame Nia Griffith will have the final word.
Dame Nia Griffith
I thank all my Labour colleagues for a comprehensive picture of the steel industry right across south Wales. We are all very concerned: from Llanwern through to Port Talbot through to Trostre in Llanelli, and all our communities across south Wales. I thank the Minister for her responses, but I hope that she will take away and reflect on our points and questions, and look again at what more can be done to make us a steelmaking champion of the world.
Question put and agreed to.
Resolved,
That this House has considered the future of the steel industry in Wales.