UK Steel Industry

Geraint Davies Excerpts

Tuesday 12th April 2016 Commons Chamber

[Ms Eagle]

My hon. Friend makes a telling point, and I hope that the Government will connect those two things in their procurement efforts, so that we can make a real difference to the potential customer base for UK steel at this very difficult time.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Does my hon. Friend share my concern that certain major procurement projects, such as High Speed 2 and nuclear, are being given to the Chinese? My fear is that they will naturally want to use Chinese steel. Also, if these were British companies, they would be paying British corporation tax, national insurance and income tax, and would be developing supply chains and export capacity. Does my hon. Friend share my fear that there is no proper joined-up industrial strategy to protect our jobs and our future?

[Ms Eagle]

I agree with my hon. Friend, and when we see the Chancellor travelling around China and asking the Chinese to bid for all these contracts, it is hard to avoid realising what is happening.

Business rates represent a far higher cost for UK steel producers. There had been reports that the Government were planning to exempt plant and machinery from business rates, which EEF has described as a “tax on investment”. The Chancellor reportedly even costed this change with a view to including it in his now infamous Budget last month before dropping it at the last minute. It seems that the measure, which would have significantly improved the future prospects of the industry, was sacrificed in pursuit of his economically illiterate and increasingly unachievable surplus target.

I said earlier that part of the problem is ideology. Labour has been calling for a modern and intelligent industrial strategy, and I am pleased to say that in yesterday’s statement the Business Secretary actually uttered the words “industrial strategy” for the first time. Now that that Rubicon has been crossed, all we need is action to match the words. Today, let us spare a thought for the thousands of steelworkers whose futures hang in the balance. The Government ignored the warning signs for far too long, and now they must act to find a suitable buyer, and to work with the steel producers, the workforce, and the clients and customers to ensure that the industry is placed on an even keel. The cost of failure, both economically and socially, is unthinkable. We need urgent action to save our steel.

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[Sajid Javid]

The hon. Gentleman is absolutely right: there can be a devastating effect on the community that goes way beyond the actual job losses at SSI. That is why we must do everything, together, to prevent the same thing from happening to any other community, and we must support the supply chain, because, as he says, there is a ripple effect throughout the community on many, many businesses.

[Geraint Davies]

Will the Secretary of State give way?

[Sajid Javid]

I will give way once more, but then I must plough on.

[Geraint Davies]

The Secretary of State may know that I worked very hard with Members on both sides of the House to secure a proper pension for the Visteon pensioners from Ford when it had short-changed them. Given that Tata has almost fully paid up its pension fund, will the Government socialise that fund, so that the pensioners can be secure in the knowledge that they will have a pension in future, and so that prospective buyers need not be concerned about that?

[Sajid Javid]

I will move on to the subject of Tata in a moment, but the hon. Gentleman is right to identify pensions as an issue, and we are considering all possible solutions.

Let me say a little about the action that we have already taken. We have taken action on power: £76 million has already been paid to steelmakers to compensate for high energy bills, and we expect to pay more than £100 million in the current financial year alone. In the autumn statement, just five months ago, we announced that we would go further. Energy-intensive industries will be exempted from renewable policy costs—a move that will save the steel industry more than £400 million by the end of this Parliament.

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[Geraint Davies (Swansea West) (Lab/Co-op)]

Port Talbot is an industrial jewel in the crown of Swansea bay. Thousands of people in the community and beyond rely on it. Clearly, we are looking to the Government to support our steel industry in its time of need. The Welsh Government, under Carwyn Jones, have come forward, and my hon. Friend the Member for Aberavon (Stephen Kinnock) has shown leadership. We want guarantees on the socialisation of pensions.

I am not here to criticise Tata. It invested £6.2 billion to buy the Port Talbot steel plant in 2007. It spent another £2 billion to cover losses and £185 million on a new blast furnace in 2013. It is a long-termist organisation. The reality, however, is that worldwide steel production has doubled because of Chinese production. As a result, world prices have halved. Tata cannot compete with the threat of China, which is 80% state owned. We need to hold on in there and do what we can to ensure a sustainable future. China is thinking strategically, whether through very low prices with HS2 and nuclear procurement, or by buying assets globally from its balance of payments surplus. We need to understand what it is trying to do and ensure that our long-term interests are sustained.

Swansea University is investing in new types of steel: multi-layered steel that generates its own electricity. It has a negative carbon footprint when it is used to clad major public buildings. We have high quality Margam coal, which is particularly good in steel production. I want guarantees from the Secretary of State. He talks about co-investment, but what co-investment are we going to have? Will the Government have an equity share in the short term? What guarantees can he give about a more level playing field on energy?

[Christina Rees]

Does my hon. Friend agree that the Government could see the current threat to the UK steel industry as an opportunity to change the way to do things, so that a structure can be established to protect the industry for many years to come? The Government could look to other sectors, such as the care sector, and to other parts of the world to learn from tripartite models of delivery involving public-private sector investment, as well as third sector involvement in the shape of a management-worker buyout.

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[Geraint Davies]

We need to look creatively at company structure and procurement. We also need to think about the fact that we are in the process of displacing clean steel with environmental protection for dirty steel. There is a case for considering carbon tariffs on steel and other manufacturing products, because we share a common environment.

On procurement, my hon. Friend the Member for Aberavon made it clear that we need to know who the Government are talking to and what reassurances are being given. We have been told that this information is commercially confidential, but what those consuming steel to build cars and so on want to know is whether, if they make an order now, in a year’s time the steel will be delivered at the price paid. We need to be able to give those guarantees to secure the future. We need to hold our nerve. The need in this case, and with any business, is cash flow sustainability. The Government therefore need to think about financial packages, so that the cash flow of the business can be sustained on the back of future orders at known prices.

It has been mentioned that half our exports go to Europe. It would be a complete disaster for us to leave Europe, with the extra tariffs that might be imposed. It is important that we move past the referendum period, so there is security for prospective buyers in knowing that we are still in the single market without more tariffs being imposed. Our first duty is to secure the livelihoods of our communities, as well as our strategic interests. It is important that the Government do not give the impression that they have given up and simply want a buyer. They need to come forward and offer any of the benefits they would offer to a prospective buyer to Tata Steel. If there is to be pension buy-out to provide security for a buyer and for pensioners, and if there is to be co-investment, it should be available to Tata as well as others. Tata showed before that it was there for the long run, but because the Government showed that they were not, it pulled out. We want a sustainable future, and it is important that Tata is brought back around the table, alongside other prospective buyers.

[Several hon. Members rose—]