Chuka Umunna
Main Page: Chuka Umunna (Liberal Democrat - Streatham)(9 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text
Vince Cable
I had already begun to deal with the cost issue. Let me explain how we are trying to offset it. Among our competitors, the French have a nuclear power industry, and the marginal cost of nuclear power is extremely low. The Germans use a lot of thermal power, but, under European rules, they have been able to grandfather the support that they have given to their industry. We have not overlooked the problem; there are very specific reasons for it.
I have dealt with the problems. Let me now deal with the major areas of opportunity, as I have rightly been asked to do. What is beginning to emerge is that successful British producers—notably Tata—are finding markets in two particular areas. One is high-quality production—alloy steels, light vehicles, aerospace—using sophisticated steels. That is where the market is beginning to consolidate and where companies are making significant margins to stay in business. The second area—again, I am very surprised the Opposition spokesman did not mention it—is exports. Within the last three to four years, exports have been growing rapidly. Tata Steel has won contracts in Singapore. We are working with it to win business in Qatar and Iraq on pipelines and other things. The future increasingly lies in export. The SSI plant, which is the big success for Redcar, has been based entirely on export production. Rather than focusing just on the problems created by import competition, let us think about this as a global industry in which good British producers have significant markets.
Those are the two areas of specialisation where British steel producers are doing well, so let me now turn to the areas of policy where the hon. Member for Hartlepool (Mr Wright) is asking us to do more: energy costs; the industrial strategy; and imports and certification.
On energy costs, I completely agree with Members on both sides of the House who argue that it is completely counter-productive to drive away energy-intensive British producers who simply pollute somewhere else. Carbon leakage is not sensible policy, so we should stop it.
We fully recognise that where British producers enjoy a cost disadvantage because of high energy costs they should be compensated, and we have agreed to compensate to the scale of £3 billion, which in an environment of fiscal pressure is by no means insignificant. In respect of one area of extra cost—the EU emissions trading scheme—compensation has already been paid; the cheques have gone out. In respect of the carbon price floor and the renewables obligations, we are in the process of trying to secure EU agreement on state aid. We have been waiting 18 months. If Opposition Front Benchers were familiar with what is happening in the European Commission, they would know that there is a major bottleneck in getting state aid clearance, not just for the UK but across the EU. It is important to reflect a little on that, because Opposition Members proclaim they believe in the EU—a belief which I happen to share—but the EU has as part of its operation something we support: strict state aid disciplines. When we are dealing with very complex problems, such as the approval for Hinkley or the approval we have recently obtained for the British business bank, those strict state aid disciplines take a great deal of time. We would be happy to bring forward compensation, subject to financial priorities, if state aid clearance could be obtained, but we are still waiting for it.
Mr Chuka Umunna (Streatham) (Lab)
Is the Secretary of State saying that the only reason why the Government—I take it he is speaking for the Government—will not bring forward the compensation package due to kick in in April 2016 is state aid approval?
Vince Cable
Yes, that is the reason. There is financial provision in a later financial year. We would clearly have to argue with the Treasury for bringing that forward, and there would be an argument, which the hon. Gentleman would have were he in government, for funding that as against other priorities. That argument has to be had, but the current constraint is state aid approval, and it is a very real one.
Vince Cable
Yes, we have that discussion on a frequent basis both at European level and internally within the Government. We are well aware of the sense of urgency in the industry and the pressure it faces from high energy costs, and we are anxious that it should be compensated as quickly as possible.
When I came into this job, we did not have an industrial strategy. We now have one. We had, as the hon. Member for Hartlepool correctly said, a strategy built around 11 sectors. We have added to that chemicals, electronics and metals. The metals strategy paper will be available later this year and will be the basis on which we can work in future with the industry.
The hon. Gentleman asked for several specific respects in which an industrial strategy could help. Let me itemise them. On R and D innovation, he is right: a forward-looking industry needs Government to support innovation. The fact that the advanced manufacturing catapult is in Sheffield is highly relevant to some of the specialist producers that make major use of it. In addition, we have provided more than £8 million for a steel industry R and D centre at the university of Warwick, which will do a lot of the innovative work in this field, so we recognise the importance of R and D.
The hon. Gentleman mentioned training. Quite apart from the across-the-board work we do on apprenticeships, we have a programme to fund 100 postgraduate researchers and 250 apprenticeships for Tata, specifically dedicated to the future manpower requirements of the steel industry.
The hon. Gentleman rightly mentioned procurement issues. One of the first problems we had to confront was procurement in the rail industry, where contracts were defined in such a way that they did not help British suppliers. We have rectified that problem. We have to operate within the laws of the European Union on procurement, but under the industrial strategy we now actively seek strategically to develop British suppliers. This is now happening in respect of, for example, energy supply chains and railways—all the recent big railway contracts are going to companies based in the UK. The point is fully understood that we have to develop British supply chains, albeit within the rules of international law that we subscribe to.
Mr Umunna
I am grateful to the Secretary of State for giving way again. Does he not accept that simply waving the flag of EU state aid approval problems in respect of the use of procurement is a red herring? So long as the benefit for growth and jobs in this country is not the sole criterion used for making procurement decisions, it can be taken into account when making such decisions. It seems to me that that is not really happening in government.
Vince Cable
It is happening, it is taken into account, and end-user industrial strategies such as those for the railways sector and the energy supply chain industries—nuclear, oil and gas, offshore wind—are operating entirely on that basis. Contracts that would otherwise have gone overseas are now going to UK producers. Why else are wind turbines being fabricated on Humberside, which we hope will provide a linkage back into the steel industry in Scunthorpe in due course?
The hon. Member for Hartlepool asked about supply chain development. I do not know whether he is aware of the advanced manufacturing supply chain initiative, which is providing support for specific supply chains. A substantial award was given to the Proving Factory, based in Sheffield, which was designed specifically to develop the supply chain within the steel industry. The things that the hon. Gentleman is calling for are happening, and we fully understand the need for them.
I turn to imports and the quality issues relating to China. I think the hon. Gentleman may have misunderstood the mechanisms involved. The testing of steel—this is a particular issue, as he correctly pointed out, in respect of rebar and Celsa—is carried out by the UK Certification Authority for Reinforcing Steel, which is an industry body not a Government body. It does the testing and tracing. As he correctly pointed out, a year ago we initiated an inquiry into whether the system had integrity and was effective. We asked the United Kingdom Accreditation Service, which is part of the BIS family of institutions, to investigate whether the certification process was working and whether the correct testing procedures were being followed. It said that, having checked, there was no particular fault within the Chinese products. We have had further strong representations from Celsa, among others, and further investigations are taking place as a result. I believe that a team from CARES is doing detailed testing in China at the moment. We want to make absolutely sure that the process is investigated. So far, no hard evidence has been found of a serious fault in the Chinese products. There may be such a fault, but we have to find the evidence and, so far, we have not done so.
The hon. Member for Hartlepool raised the topical issue of the future of Tata and Celsa. The position of Tata is straightforward: it has announced its intention to sell the long products division. As I have explained in the House before, I had a substantial discussion on this matter with Mr Mistry when I was last in India. Mr Klesch has expressed an interest in buying it, and my colleagues and officials and I have had discussions with him, although we have so far discussed ideas only at a very general level. When he has proposals, he can bring them to the Government and we can discuss them and negotiate. The whole process is at a much more general level at the moment than the hon. Gentleman hinted at in his speech.
I very much welcome the fact that Tata has engaged with the Community union to produce an analysis of the future of the industry. Perhaps that will give us a whole new set of options. It is a good initiative and we are eager to work with it. I believe strongly in the steel industry. I have been closely engaged with it since I became Secretary of State. I think it has an excellent future, but it will need continuing support from this and the next Government. As far as I am concerned, I will remain close to it and closely involved with it.