UK Steel Industry

Jonathan Edwards Excerpts

Thursday 21st January 2016 Westminster Hall

[Stephen Kinnock]

My hon. Friend makes an excellent point. He will be aware that a debate is taking place in the Labour party, but I can assure him of which side of that debate I fall on. There are a number of reasons why I fall on that side of the debate, but saving our manufacturing industry—up to 20,000 jobs rely on the nuclear programme to which he refers—is critical. I will certainly contribute forcefully to the debate in our party from that perspective.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I congratulate the hon. Gentleman on securing the debate. The estimated capital cost of Trident could be up to £165 billion. Is he seriously saying that if the UK Government redirected that amount of capital investment, we would be able to produce only 20,000 jobs?

[Mr Charles Walker (in the Chair)]

Order. I am not allowing Members to get into a debate on Trident. Mr Kinnock, can you continue, please?

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[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

It is a huge pleasure to serve under your chairmanship, Mr Walker, and to follow some of the excellent speeches we have had this afternoon, not least the very passionate speech we heard from the hon. Member for Ogmore (Huw Irranca-Davies). If he succeeds in his ambition of gaining the seat in the Assembly for his constituency, he will be a great loss to this place, although I understand his aspirations to return home to the motherland once and for all.

We face two distinct choices as policy makers: first, do we just accept that the days of the domestic steel industry are over, that production in the UK cannot compete with cheaper production elsewhere, and that, in a global market, only the fittest will survive? Or secondly, do we stand firm in the belief that steel production is a vital strategic industry in Wales and in the UK, and that all options must be explored and taken to save the industry, much in the same way that the Treasury responded to the banking crisis in 2008?

Plaid Cymru and I are firmly of the second view, because it is difficult to comprehend the impact on the Welsh economy if steel production was to cease in our communities. Tata and its supply chain supports nearly 20,000 jobs in south Wales and, according to the Welsh economy research unit at Cardiff University, its operations are worth £3.2 billion annually to the Welsh economy.

The industry is undoubtedly facing a perfect storm of a glut of cheap imports from China, Turkey and Russia, as well as falling prices and rising energy costs. Reuters recently reported that Chinese imports of reinforcement bar steel have increased from zero to 250,000 tonnes a year since 2012—a quarter of the market, directly undermining Celsa in Cardiff which specialises in that product. I think the hon. Member for Aberavon (Stephen Kinnock) mentioned the figure of 45%, which is 20% more than the figure that I mentioned. That just shows the impact of dumping by Chinese steel producers.

We need action, as the hon. Member for Newport East (Jessica Morden) said, at all tiers of Government—at Welsh, UK and European levels—if we are serious about saving the industry. The Welsh Government are probably in the best place to move swiftly, and I welcome the establishment of the taskforce, although I hope it will be more about coming up with ideas as opposed to being seen to do something.

Employment costs are obviously one major cost for steel producers. Tata contributes £30 million in business rates across its three Welsh sites, with 40% being measured on plant and machinery. Business rates are devolved and a Welsh Government-funded business rate relief scheme based on plant and machinery is one obvious possibility, saving around £12 million. The choice is quite simply a 40% hit on business rates from Tata on a temporary basis or a 100% hit if its Welsh plants go.

Secondly, the Welsh Government should be considering a Welsh public stake in Tata’s Welsh steel operations. I notice that a similar policy is Labour’s UK answer to the difficulties of the industry, yet at a Welsh level, the First Minister has ruled that option out. I do not particularly want to make partisan political points today, but if Labour is not prepared to pursue that policy in Wales where it has the power to do so, why should anyone take their UK policy position seriously? Our position, which we have put forward this week in the Welsh media, has been supported by Gerry Holtham, a member of the Labour party and perhaps the closest to a rock-star economist that we have in Wales.

A public-private partnership to develop the planned power plant at Tata’s Port Talbot site would be a huge vote of confidence in the plant, making it more sustainable. The planning process would need to be streamlined—perhaps the hon. Member for Aberavon will want to talk about that when he winds up, given the discussion we had privately a few days ago.

I notice that the UK Government are willing to loan £400 million to Greybull Capital, a private equity firm, to help it purchase Tata’s Scunthorpe site. The UK Government should be looking at similar support for Tata in Port Talbot—or to the Welsh Government, or on a combined basis. That sort of intervention would constitute an environmental improvement and therefore, in my understanding, would be legal under state aid rules. If the UK Government do not pursue that idea, many in Wales will be left wondering why they are willing to support steel plants in England and not in Wales.

The Welsh Government must radically change their procurement policy to promote domestic steel—I disagree somewhat on that with the hon. Member for Newport East. They have by far the worst record of the Governments of the UK. Again, state aid rules should not be used as an excuse. Domestic producers are competing against heavily subsidised and state-owned Chinese steel. In other words, it is not a fair and open competitive market in the first place.

At UK Government level, we need a clear indication that Ministers are on the side of the industry. I note that only one Conservative Back Bencher is present, none from the Liberal Democrats, some from the Scottish National party and Plaid Cymru, and many from the Labour party. If there were a groundswell of support for the industry from Government Back Benchers in a debate such as this, I can imagine what effect it would have on the Government’s mindset.

[Stephen Kinnock]

The hon. Gentleman mentioned the important issue of the power plant at Port Talbot, which has a green light for its planning. I understand that construction of the plant and its operation would save between £25 million and £30 million a year on energy bills for the Port Talbot plant, so it would be a huge saving and a great boost to the plant. Does he agree that it would be welcome if the UK Government and the Welsh Government came together in a dialogue, pooled resources and gave some support to Tata Steel, both financial and in kind, to facilitate construction of that plant?

[Jonathan Edwards]

I fully agree with the hon. Gentleman. That was the point I was endeavouring to make. A one-off capital cash injection could have tangible benefits and would be a huge vote of confidence in Tata at Port Talbot and the communities of south Wales.

I challenged the Prime Minister yesterday about the huge contradiction in cheerleading the case for China to have World Trade Organisation market economy status, which would make it impossible to impose tariffs on steel, while at the same time belatedly calling for unfair price tariffs against China. Many hon. Members have spoken about that so I will move on to my next point.

The UK Government have a defining choice. Do they put the interests of the City first and deliver their wish that London becomes a centre for trading in the Chinese currency, or do they protect manufacturing workers? I hope that, for once, they will put the communities I serve before the City of London.

Port Talbot, Trostre and most of the supply chain are in a tier 1 European Union assisted area. As I told the Minister during the debate on a statement last week, the UK Government should be looking at innovative operating aids to reduce employment costs, such as a national insurance contributions holiday. State aid is permissible under EU law if there is unfair competition or market failure, as is the case in this instance. We should be taking action now and pressuring the European Commission for a derogation. We cannot afford to wait years for a decision.

Similar to what the Welsh Government are doing, the UK Government should be looking at its procurement policies to ensure that domestic steel is used in large infrastructure projects. The hon. Member for Aberavon made a valid point about EDF.

The difficulties facing the industry are not, of course, confined to Wales. The UK Government should introduce a temporary reduction in business rates for steel in England. That would trigger consequential funding for Wales, Scotland and Northern Ireland to help their industries within the devolved Government areas.

At European level, the Commission must wake up and smell the coffee. China is producing steel, selling it at below production cost and dumping it on the European market. It is a purely aggressive strategy aimed at decimating steel production in the EU. The Commission’s job is to act. We can contrast that with the response of the US Government who, according to Bloomberg, are taking steps to impose a 265% tariff on Chinese steel. As I have said, it is the UK Government’s job to press the Commission. If they refuse, my party’s call for the Welsh Government to have a direct role in EU decision-making processes to protect Welsh interests will become a battering ram.

The Commission’s investigations into Chinese steel dumping are taking far too long and its recommendations have been pitiful. For reinforced bar steel products, it recommended a measly tariff of only 9%. It is estimated that an investigation into coiled steel, which is made at Port Talbot, will take a year. The US—I am not usually a cheerleader for the US Government—takes only 45 days to conclude such investigations.

While European bureaucrats dither, Welsh workers are losing their jobs and the pace of action is simply not good enough. To those who argue that a Brexit is the solution to my complaint, I respond by telling them to look at what happened to the coal industry—we would be leaving the steel industry in the hands of a Westminster Government.

In reality, the steel industry in Wales faces massive challenges. I am informed that Tata in Port Talbot does not produce specialised products and therefore faces the brunt of the exports from China and other economies. The transition to a more modernised production system creating specialised steel will not be easy. It will require significant capital investment, but if we are serious about securing a future for steel production in Wales and across the UK, we need a range of temporary interventions to create breathing space for the necessary investment to be delivered.

In conclusion, this has been a deeply troubling week for Wales and our economy. The ongoing problems have been highlighted for a long time, yet the Labour-run Administration in Cardiff seem to stand passively by and do precious little, apart from blaming the UK Government. The Tory Westminster Government seem more interested in helping their friends in the City than in helping the working communities that I represent.

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[Mr Wright]

No, talk to them in a strategic manner rather than force them.

When it comes to moving research and development into new technologies, renewables are a great way to secure a real, viable UK steel industry for the future, yet the Government seem hell-bent on ensuring that we cannot do anything. One example is carbon capture and storage. Real help could have been provided, certainly for steel on Teesside, yet that has not been provided. That is a shame. What can the Minister do to ensure real co-ordination for what is meant to be a strategic industry?

I want to finish on constituency matters. This week in Hartlepool, 62 job losses were confirmed at Tata’s steel plant. That is on top of the 80 jobs lost at the end of October, when Caparo Industries’ Hartlepool forging plant went into administration. Although Caparo, the national group, has been sold, the factory in my constituency remains closed. Unemployment in Hartlepool rose in December, and the jobless rate is two and a half times the national average. In Hartlepool, we simply cannot afford to lose these jobs and these skills from our strong manufacturing base.

I understand that the redundancies affecting Hartlepool are not on the same scale as those affecting Redcar and Port Talbot, but as I have just outlined to the House, the employment situation in Hartlepool is precarious. Given the real problem with the global price of oil going down to something like $28 a barrel and given that the Tata Steel plant in Hartlepool is a provider, in the supply chain, to the oil and gas industry, we are going to see even more problems, so what is the Minister doing to be alert to these warning signs in order to retain capacity? I have previously written to her, asking whether the same level of support could be provided to Hartlepool workers affected by Caparo’s closure as was the case with SSI. The Minister replied that that could not be granted, but I ask now, in the light of this week’s redundancies affecting Hartlepool, whether that decision by the Minister can be looked at again.

[Jonathan Edwards]

I congratulate the hon. Gentleman on his speech. He has come up with some very interesting ideas and spoken with great passion. What would be his advice to his colleagues in the Welsh Government, who are deliberating on these issues now? If he was a Member of the Welsh Government—of course, a Labour Government—what things would he be directly calling for now?

[Mr Wright]

One thing that strikes me about these issues is this. As I said, these are global forces. The price of steel has halved. However, there seems to be a remarkable consensus from industry, unions, MPs and devolved Administrations about what could be provided as a buffer to help to safeguard the steel industry. The five asks from the industry are achievable and realistic and could be provided, but they have not been provided. It is a case of finding out from the Minister in her winding-up speech whether that will be the case.

The British steel industry is incredibly important as a foundation sector for much added value throughout our manufacturing base. If we lose the steel sector, we lose a large part of manufacturing. We cannot allow it to slide any further. We need to be acting. We needed to act years ago; we needed to act in the aftermath of SSI; and we certainly need to act now, in the light of further real trauma in the steel industry this week.

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[Stephen Doughty]

I agree wholeheartedly. We have already heard about a letter from Roy Rickhuss, the general secretary of the union Community, to the Minister. The letter, which he made public, says clearly:

“As you will know, it is widely understood that the UK Government has taken a decision to support China’s bid to receive market economy status from Europe. This would be a complete disaster for our steel industry, as it would make it even harder for European producers to gain protection from unfairly traded Chinese imports.”

This is not just about what we have seen, as there are also issues involving the Chinese currency. Many experts agree that the recent devaluation suggests that there is an increased chance of further growth in Chinese steel exports and dumping into markets. We have discussed this in many debates, but there is also a problem that if China is exporting all that steel, and certain other countries and Administrations around the world are taking measures to prevent imports of that steel, the impact on the UK market will be even greater.

[Jonathan Edwards]

I am grateful to the hon. Gentleman for raising the point about currency devaluation. We have been in huge market turmoil since the new year. It is likely that the Chinese Government will devalue the currency further. If that happens, the problem is likely to get even worse.

[Stephen Doughty]

Absolutely. I would certainly be interested to hear the views of the Minister and experts within the Department for Business, Innovation and Skills about what impact that might have, and whether it is likely to increase the pressure further.

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[Kevin Brennan]

Indeed. I am not sure whether the Minister was party to that deal, but it would be interesting to hear what she knows about it.

As hon. Members have said, the Government must give a much clearer signal about their position on the minimum strategic capacity of the British steel industry.

[Jonathan Edwards]

The hon. Gentleman is making important points, but will he help me out with something? In November last year, at Labour’s eastern regional conference, the leader of the Labour party was calling for direct Government intervention in the steel industry. That is common sense, given the problems in the industry, yet the First Minister of Wales has completely ruled it out. As a Welsh MP, does he support the position of his leader in Westminster or that of the First Minister of Wales?

[Kevin Brennan]

I do not think that anything the hon. Gentleman said is going to solve the dumping problem we are discussing now. We all understand how Plaid Cymru works on these matters. Its only interest is not speaking up for UK steelworkers throughout England, Wales and Scotland, but trying to drive a wedge between people to make its argument for a separate Wales, which incidentally would mean, as I said earlier, along with a separate Scotland, the end of any kind of strategic capacity for steelmaking in this country.

[Jonathan Edwards]

You should be ashamed of yourself.

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[Kevin Brennan]

The Minister says that, but we need to know when it is going to happen. The final two actions that UK Steel called for were support for much more local content in major construction projects, and direct funding for the sector on research and development and environmental improvements. We need to hear the Government’s position on that.

In order to leave enough time for the Minister, I will finish on this point—

[Jonathan Edwards]

Will the hon. Gentleman give way?

[Kevin Brennan]

No, I will not give way. The hon. Gentleman and I can have a chat later, if he wants.

Will the Minister finally answer the question that she has been asked many times, and that I asked her in the debate in October: what is her and the Government’s view about what represents the minimum capacity for steelmaking in the UK’s strategic interests? If she can answer that question and give us clarity, everybody will be extremely grateful.

[The Minister for Small Business, Industry and Enterprise (Anna Soubry)]

It is a pleasure to serve under your chairmanship, Mr Rosindell, as it was to have Mr Walker in the Chair before you. I congratulate the hon. Member for Aberavon (Stephen Kinnock) on securing the debate through the Backbench Business Committee. It is pertinent that it is being held in this very sad week when, yet again, we have seen a huge number of job losses at Port Talbot and other parts of south Wales, followed by yesterday’s news that Sheffield Forgemasters will be making 100 of its employees redundant.

I apologise, Mr Rosindell, for often not even chuntering but speaking quite loudly from a sedentary position, but I get somewhat agitated because I am a little tired of Opposition Members consistently misrepresenting not only my own views—there is nothing that makes me more cross than when somebody tells me what I think—but the views of the Government, and questioning our determination and all that we have achieved to secure the future of a sustainable steel industry. Nobody but nobody has a monopoly on compassion, support and care for any of the workers in this country. We all come to this place—at least I hope we all do; this is certainly my experience—with the same passion and care for all our constituents and, indeed, everyone. Where we disagree is on how we achieve the things that, by and large, we all want.

[Jonathan Edwards]

Will the Minister give way?

[Anna Soubry]

In a moment.

I want to put something on record. I do not know whether it is significant, but my great-grandfather worked as a cutler in Sheffield. He then became a teacher, and then music teacher. In fact, he was knighted, but those are matters that do not concern us.

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[Anna Soubry]

I can do better than that, and I intend to.

My grandmother came from south Wales. We do not know much about her history, but we believe that her family also worked in the steelworks. Many of us can draw on our family experience, which is perhaps why I have a passion for securing the future of the steel industry, as does my Prime Minister. When I was appointed in May, one of the things that he asked me to do, apart from effectively being the Cabinet representative for small businesses, was to help to support and assist the steel industry in difficult times.

[Jonathan Edwards]

Based on the Minister’s opening remarks and the disgraceful comments from the Labour Front-Bench spokesman, will she explain why during Prime Minister’s questions yesterday the leader of the Labour party had six opportunities to ask about steel, but did not raise the issue once? It was left to Plaid Cymru to raise the matter during the most important parliamentary event of the week.

[Anna Soubry]

The hon. Gentleman has put all that on record.

My hon. Friend the Member for Brigg and Goole (Andrew Percy) quite rightly said that some of this should be well above party politics. It is tedious that Opposition Members do not understand that they judge everyone by their own standards; the Government are genuinely not as tribal. Opposition Members—