Steel Industry (Nationalisation) Bill

Lord Fox Excerpts

2nd reading
Tuesday 16th June 2026 Lords Chamber

[Lord Redwood (Con)]

On a point of information—

[Lord Fox (LD)]

We do not do points of information at Second Reading.

[Lord Leong (Lab)]

I will continue. In developing this legislation, we have drawn heavily on the framework established by the Banking Act 2009, adapting well-established precedents, rather than creating entirely new mechanisms. The principal transfer powers are subject to a sunset clause and will expire two years after Royal Assent. This ensures that they remain in force only for as long as necessary to achieve their intended purpose. The Bill provides for compensation arrangements when powers are exercised. Compensation will be assessed independently, by a valuer appointed through an independent process. This ensures fairness, impartiality and proper protection for affected parties. The Government are committed to treating all investors fairly and consistently.

Many of the technical provisions contained within the Bill are designed to ensure that any transfer of ownership can be carried out smoothly and effectively. In practice, we are seeking through legislation to replicate many of the outcomes that would normally be achieved through a complex commercial transaction. That inevitably requires powers to address legal and operational issues arising from such transfers and to ensure continuity of operations. These powers are not novel; they follow established legislative precedent, and are solely intended to ensure that the legislation’s objectives can be achieved effectively.

The Bill is ultimately about the kind of country that we aspire to be. Do we believe that Britain should continue to produce the steel upon which modern economies depend? Do we believe that strategic industries matter? Do we believe that economic security, industrial resilience and national security are worth safeguarding? Do we believe that steel-making communities deserve a future? The Government’s answer to each of those questions is yes. The Bill demonstrates our resolve to safeguard a strategically important industry. It demonstrates our commitment to safeguarding jobs, supporting communities and securing Britain’s industrial future. It demonstrates that this Government are prepared to act decisively when the national interest demands it.

Today, we have an opportunity to send a clear signal to steelworkers, investors, industry and the country that Parliament is committed to preserving and strengthening Britain’s steel-making capability for generations to come. I look forward to the contributions that noble Lords will make during this debate and to the constructive scrutiny I know this House will bring to the legislation. I beg to move.

--- Later in debate ---

[Lord Fox (LD)]

My Lords, I join the chorus welcoming the noble Lord, Lord Leong, to his new ministerial role. He has not only got the new role but got it in time to steward this Bill, and the Commercial Payments Bill, through your Lordships’ House. What a time to be alive.

As we have heard, around Easter 2025, the Government pressed the emergency button. They pulled us into Parliament on a Saturday and, as a result, acquired the powers to make decisions regarding the Scunthorpe blast furnaces and prevent its owners running it down. Subsequent events supported the Government’s haste in that movement. To avoid becoming a hybrid Bill, this Bill carefully avoids Scunthorpe. However, I very much doubt that we would have this Bill were Scunthorpe not an issue. It sits there, like Banquo’s ghost, and clearly the Government are having to press buttons in order to take control from the Chinese owners.

So that noble Lords did not have to, I reread my speech from last year. To be honest, I could have copied and pasted large parts of it. In the Saturday debate, I noted that the steel industry’s problems did not start a couple of years ago but were systemic and had been there for a long time. In that regard, I noted the hubris of the Conservative spokespeople—and the noble Lord, Lord Hunt, did not let me down today. There are huge responsibilities for this industry that go back a long way; it is not two years’ work.

I asked how steel fitted into the carbon emissions route to net zero; I questioned the path to electric arc conversion, and, in giving support to that Bill, I said that there needed to be an overarching steel strategy. Well, we have reached the privatisation stage and, to be honest, I am quite surprised it has taken that long. The Scunthorpe plant has been haemorrhaging public money for over a year and the Government have clearly been arm-wrestling with the owners, Jingye.

In 2025, the Government published a steel strategy that had billions of pounds attached to it. In this context, this Bill is part of a very high-stakes exercise that the Government are seeking to run. It is therefore important that there is sufficient scrutiny, both in your Lordships’ House and at the other end, of every move that follows this Bill, should it be passed.

I will use this speech to set the scene. There are four broad issues of concern, and we have heard them raised in different ways: national security, economic resilience, modernisation, and jobs and communities. The justification for protecting the steel industry has always been that it is a strategic asset, not least in that it supports defence, critical infrastructure, wider national resilience and our advanced manufacturing industries. For many years, a contrary commercial argument has preached that most of what we need is available on the open market and is usually cheaper as a result. Clearly, the Bill’s proponents frame it as protecting the country’s ability to make essential materials at home. This turns on the question of sovereignty and readiness. Given the world we live in now, Liberal Democrats side with this sovereignty argument. Going on the world market is no longer a safe option to take us forward.

However, I remind your Lordships that none of what we discuss today can be taken in isolation from the steel tariff regime and the implementation of CBAM, the carbon border adjustment mechanism, nor can success be achieved without the provision of low-cost green energy. I will talk about the first two points and leave energy costs for another day—not because they are unimportant, clearly, but because they do not directly relate to this Bill.

On tariffs, I thank the Minister for his letter clarifying some of the issues, but I question the spirit of his reply, which seems to be that everything is okay in how the tariffs will be pitched. The word from steel users is that it most certainly is not. We are being told that the measures due to come into force in just two weeks, on 1 July, are likely to have a materially damaging impact on downstream manufacturers, with immediate implications for competitiveness, investment and jobs.

Where there are no direct domestic sourcing alternatives, materials for steel users must be imported. However, we are being told that the current commodity code structure is too broad, reflecting some of the issues raised by the noble Lord, Lord Frost. There seems to be a need for a more subtle coding process in the focusing of tariffs. If essential items that cannot be domestically sourced are captured in the tariff regime, this will have a dire effect on industrial users. With tariff-free quotas being reduced by around 60% and a 50% tariff applied beyond those limits, businesses that need those kinds of steel are effectively being taxed on critical inputs, with no ability to substitute domestic products if they are not being made. I think the Department for Business and Trade has received proposals from the industry to remove or move certain commodity codes, make amendments to quota sizes and utilise authorised use schemes. I urge the Minister to respond to this and make sure that the department is fully co-operating with different elements of the supply chain to ensure that what I believe is an unintended consequence does not come back.

Most of the imported steel comes from the EU, and negotiations on this between the UK Government and the European Union are critical. If they reach a successful fulfilment, many elements that are causing problems around tariffs will be eliminated. However, we are homing in on a very tight corner here; as I have pointed out, 1 July is two weeks away and we may have an interim period between an agreement with the EU and the implementation of these tariffs. It would be useful to hear from the Minister how the timing and phasing of this could be achieved and whether putting relief in for a further period until the EU negotiations are concluded would give better certainty to our businesses. We will come back to this in Grand Committee, but that will be another week gone, so it is important to find out where we are going.

Fundamentally, I want to make the obvious point that it is not the manufacture of steel that is strategic, but its use. If ring-fencing steel production using tariffs creates higher costs for our businesses, we are missing the point. It is how we make stuff that is important. We do not just need a secure industry that produces strategic materials; we need it to be cost effective. That is one element of economic resilience.

The Government have said that their actions are meant to avoid a sudden halt in production and provide stability while longer-term options are considered. The nub of that is what the longer-term options are. Although we have a steel strategy, the Government have an awful lot of work to do to flesh out how they see the future of our industry. A key element of that is whether they see Scunthorpe continuing to have blast furnaces or converting to electric arc, as raised by the noble Baroness, Lady Redfern. The Minister and I have discussed substitutability and whether there is a strategic need for blast furnace capacity to keep virgin iron production in the United Kingdom. I would like to hear from the Dispatch Box that, if we are going to all-electric arc provision in the United Kingdom, we will be able to maintain all the strategic needs of steel in this country—as it stands now, not in some future provision where electric arc can be honed and tuned. Can we deliver the steel we want with the knowledge we have now?

The aim is to make the industry investable. Can the Minister explain how this will be achieved? For example, every location will come with a huge environmental legacy. Ultimately, there will need to be remediation, and usually it is the owners of the businesses who have to fund that. Every location has important pensions commitments. The Bill appears to deal with pensions liability only indirectly. I presume that, once it is taken into public ownership, Ministers will have to manage the company’s wider obligations, including pensions, through the rescue or transfer process. Can the Minister expand on that? Both these factors affect investability. Can the Minister explain their attitude to environmental and pensions liabilities in any nationalisation when they are looking for investors? Will subsequent investors in nationalised steel have the opportunity to invest clean of past liabilities, or will they be investing in a business that retains them? Again, I will pursue this topic in Committee.

The Government have said that their aim is not just to preserve the status quo but to create a modern, competitive steel sector. Once again, this legislation is merely a route to explore future options. It is still not the final answer.

The Government have rightly emphasised the importance of steel plants for jobs and communities. Nationalisation could preserve many of those jobs, but does the Minister recognise that, in creating that modern, competitive and investable steel sector, there may well be fewer jobs in future? How will the Government prepare those communities now so that they can be made stronger and absorb any changes to employment patterns in their area?

The other important part of this Bill is the inclusion of the public interest test. The noble Lord, Lord Sikka, did my work for me in laying out some of the puts and takes that go into that. There will be tension between the real value of Scunthorpe, whether that is positive or negative, and our relations with the Chinese Government. In that case, where does the balance of public interest lie? How do the Government view this?

Last year, we were asked to approve an emergency stopgap to save Scunthorpe. This Bill is couched in wider terms, devoid of detail and laden with executive powers that could very well leave taxpayers exposed to huge costs and liabilities. That vagueness means it is unclear how it will protect jobs and what the future of steel will look like. Because of this, my colleagues in the Commons tabled amendments seeking to give Parliament more oversight of the developing stages of this paving legislation. We agree that it is important to get on with this, but only with the necessary parliamentary controls. We will retable those amendments.

As a parting point, to echo the noble Lords, Lord Bilimoria and Lord Wigley, nothing in the Bill should be used to put Tata and Port Talbot at an unfair disadvantage, as their transformation reaches fruition.

In practice, the UK steel strategy’s success will depend on whether the prevailing energy costs, the implementation of the CBAM, huge public sector investment, the imposition of procurement and demand measures, and the introduction of import tariffs and tighter controls are enough to make domestic production commercially viable. That is a huge task, and we will have to work together closely to achieve it. It is a mission that we want to succeed and we support the Bill, with some provisos. I look forward to Grand Committee.