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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.