Tata Steel: Port Talbot

Lord Johnson of Lainston Excerpts

Tuesday 19th September 2023 Lords Chamber

[Lord Anderson of Swansea (Lab)]

My Lords—

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

Apologies, my Lord. I think I have the opportunity now to respond to the two opening speeches and then I will answer questions one at a time, if I have the order correct.

I greatly appreciate the debate we have had so far over what I believe is a pretty sensational recovery of an extremely difficult situation. Noble Lords will be aware that these conversations around Port Talbot have been going on for many years—some say even more than a decade. Certainly, from my own experience in the private sector, I regarded the situation with a great degree of pessimism, to be frank, and I am surprised that the tone of the debate is not more positive. That does not negate the realities of saving the situation and the transformation that will result in the locality.

I will go through the points raised by the noble Baroness, Lady Chapman. I am happy to answer them one by one because we have a strong and coherent policy response to each of the very important points raised. This is a very serious issue. We are not playing politics here; we are dealing with people’s lives and the important commitment of, I believe, all of us in this House to maintain steel production in Port Talbot and to guarantee a future for those communities. What we have ended up with is a powerful opportunity for this country to reshape its industrial base in terms of producing steel and reducing emissions. Noble Lords will be aware of the astonishing level of emissions that Port Talbot alone produces; I think it is 1% of our entire national output. If we are serious—and I think, collectively, we are—about reducing carbon emissions, to reduce one site that produces 1% of the emissions by 80%, which is what this outcome will produce, is significant for the collective challenge we are presented with.

I also find, if I may say so to noble Lords in this House and to the noble Baroness, Lady Chapman, and the noble Lord, Lord Fox, that there is an opportunity to shift. This is a business case—so it is subjective and perfectly reasonable to raise it—for virgin steel, whereby we import the ore, at great cost to emissions and national resilience, and recycle the nine or 10 million-plus tonnes of scrap. This presents an opportunity to us, to Port Talbot, to the people of Wales and to the whole country to realign our steelmaking industry—to rightly make the most of this scrap steel, which otherwise is being exported to Turkey or the US to be recycled. We were losing out on an enormous opportunity to be part of the circular economy.

Let us look at the prima facie business case for what the Government have done, to work in partnership with Tata. I put on record my personal thanks to the leadership of Tata for the extraordinarily good tone of the negotiations that I know it engaged in. From my first meeting with the chairman of Tata a year ago—although I was not involved in these specific negotiations —there was a very clear signal that Tata felt it was important that it reflected its family ownership in terms of commitment to the community of Port Talbot and the United Kingdom. I hope all noble Lords will join me in expressing thanks for the intense amount of good will demonstrated.

The Government have been extremely brave and forward-footed in bringing forward a proposal that will enable us to transform this site, reduce our emissions and, through the transformation to the Celtic freeport projects and the work we shall do—the noble Lord, Lord Fox, rightly raised this—in releasing land that is currently either potentially contaminated or has risk around it, create up to 16,000 new jobs. The noble Baroness, Lady Chapman, is right to call back some of the policy decisions taken in the 1980s, when there probably was not enough sensitivity paid to the transformation process, which affects people but ultimately makes us safer. That is why the Government have been extremely aware of and sensitive to this crucial point that affects people’s lives. Working with Tata—again, a private enterprise—we have created, or are in the process of establishing, a £100 million fund specifically to look after the communities and the people affected. I am aware that specific task forces are being set up to ensure that the process can be properly handled.

There is a reasonable case to be made by noble Lords, although I do necessarily agree with it, about the process by which this announcement was made, but I am sure all noble Lords who have been involved in sensitive and complex commercial negotiations will be aware that the specific terms cannot be entirely public. It was quite right that we got to a good decision, rather than one jeopardised by too much general community discussion. However, as the noble Baroness, Lady Chapman, will know well, as will her colleagues on the Front Bench, these discussions have been going on for a very long time. Indeed, the announcement of electric arc furnaces at Port Talbot really should have brought great relief to many people, because the worry in the air was that a far more jeopardous decision would be made.

This gives us an enormous opportunity to restructure our industry and reduce our emissions, which is a core commitment of all sides of this House and this Government. It gives us an opportunity to reinvent a huge site with great potential, creating tens of thousands of jobs. I have tried to take a much more positive view of what is a wonderful partnership between the Government, private enterprise and the community that will safeguard thousands of jobs, when the risk of losing those jobs was so significant.

I am aware that both the noble Baroness, Lady Chapman, and the noble Lord, Lord Fox, asked me specific questions, which I am sure other noble Lords would like answers to. If the noble Baroness will allow me, I will just cover those points I did not cover in my main speech. There is an issue over virgin steel. The noble Lord, Lord Fox, suggested that we guarantee always to have a capacity for virgin steel.

[Lord Fox (LD)]

I did not say that; I just asked what the assessment was.

[Lord Johnson of Lainston (Con)]

I apologise. The noble Baroness, Lady Chapman, asked whether we would guarantee to make virgin steel strategically important. It is not my place at this Dispatch Box to make such industrial guarantees. However—again, I am happy to take advice from experts—the arc furnaces being installed at Port Talbot are far more sophisticated, I am told, than current arc furnaces in scale, sophistication and the quality of the steel they can produce. They will produce, even on the current plans, steel very close to the quality that we require for all our steel needs.

Think of the automotive sector. Port Talbot provides half of all sheet metal for the automotive sector in the UK. That can still be provided. Think of railway track. That, I am told, can still be provided using these processes. We will be importing the necessary steel to produce cans and other specific steel that requires virgin steel, but we believe that over time—this is where the technical debate comes into play—we can produce the same quality of steel that is hoped for to enable us to ensure that we have resilience in that area.

I was asked about the supply of green energy. I assume that linked to that is a question about connectivity and pace of change. We are in discussions with National Grid, Tata and other agencies to ensure that can be done as soon as practically possible. The process that has led up to this very celebratory announcement has been going on for some time and there has been a great deal of planning. I do not have a specific date but the assumption is that everything will go on track in terms of the supply of green energy, grid connectivity, the decommissioning of the blast furnaces and the introduction of the electric arc furnaces.

I believe there was a question about support for the workforce, which I hope I have covered. In his comments the noble Lord, Lord Fox, raised the situation of the Whitehaven mine. There was never an indication by Tata that it was going to use the coking product from that mine, so I cannot answer further than to say that that was never in the expected plan, whatever the outcome was. I am happy to look further into the export possibilities of the mine, but I do not think that is necessarily relevant today.

The British industry supercharger is a follow-on policy to support energy-intensive industries and make sure that they can compete. I am happy to write to the noble Lord on the specific number of companies that qualify. It is not a huge number; it is quite a specific number of heavy energy users that we are supporting to make sure that they can compete on an international scale. I think all noble Lords would agree that it is very important that we continue to provide that type of support.

I have two final points. I have covered the decontamination point briefly; one of the very important elements of the decision-making around this process was why we could not simply sell the site to a third party. I asked that question myself. The reality is that there are so many complexities around the site, including decontamination and the liabilities that the Government would have had to undertake, that this is genuinely the most effective way to retain as efficient a support level from the Government as possible—not to oversubsidise or oversupport—while at the same time ensuring that the company is viable and can be successful. I mean this in a heartfelt and sincere way. We can deal with the significant issues that those sites present, and at the same time it will have the knock-on effect of using the land for the amazing regenerative opportunities of the Celtic port plan.

On my last point, I thank the noble Lord, Lord Fox, for raising some of the great successes over the last few months. I have been proud to be part of the department that has delivered these successes, such as the announcement a few months ago of the Tata gigafactory, one of the largest buildings ever to be built in the history of this country, maybe even the largest, and one of the biggest investments ever in the car industry; the announcement that Stellantis are going to build Fiats, Peugeots and Citroëns in Ellesmere Port after significant consideration of whether or not it wanted to base their production facilities in the UK; and the announcement last week that BMW is going to—again, after significant consideration—build its electric Minis in this country. Further announcements from companies such as Nissan on its capacity to build cars will ensure that this country has a strong industrial base.

I am very proud of what we have managed to achieve. They are true public/private partnerships. We are asked whether we have a strategy. The strategy is: we want a strong industrial base in this country and, if I may say so, we are delivering it.

[Lord Murphy of Torfaen (Lab)]

My Lords, can I press the Minister on the point of process and communication that he has touched on? When I had the privilege of being the Secretary of State for Wales, I went to Port Talbot steelworks on many occasions. On those occasions, I saw a very close relationship with the trade unions and the representatives of the workforce. It seems to me that they have been completely left out of making the case for changes in Port Talbot. After all, 3,000 jobs have been lost—a terrible price to pay for what the Minister referred to as a “triumph” in ensuring that we keep the steelworks in Port Talbot. Can he tell me whether any attempt was made to deal with the trade unions before this announcement was made? Can he tell the House whether the Welsh Government were involved before the announcement was made? Can he also tell us what effect this will have on the steel plants in Trostre and Llanwern?

[Lord Johnson of Lainston (Con)]

I am very grateful to the noble Lord for his points. I think it would be very unfair to suggest that at any point the Government or myself—I would say this personally—are somehow triumphant about people not having their employment. I think that is very unfair of any noble Lord in this House to suggest that there is triumphalism over an important transformation.

However, it is right to celebrate the saving of many thousands of jobs, and the opportunity to repoint our steel industry, which the noble Lord cares about with his heritage and history. We are surely working as one here in solving an extremely complex problem for the better. I could not think of any other outcome that could be as optimised as this. That does not mean that every outcome does not have an element of compromise. In the short term, there have been very difficult decisions to make, but I have made it very clear that the Government take this incredibly seriously. A huge number of lessons have been learned over the last 40 years in terms of industrial transformation. That is why we are committing £100 million specifically to the transformation fund, to ensure that people are insulated to some extent from the effects, and so that we can service communities and assist individuals who may find themselves without employment in that specific job in the future. We also hope that we will create tens of thousands of jobs for the communities of Port Talbot through this act.

There is a question that has come up often and with which I have sympathy, and I hope the noble Lord will give me credit for that. I understand there is frustration about the consultation process that led to the announcement last week. I am sure that many people would have liked to be consulted, but it is very difficult to engage with a broad group on specific commercial transactions such as this. Having said that, as far as I am aware, there has been a huge number of engagements and consultations with all the unions involved—the three unions at Port Talbot—and with the Welsh Government. It is very important that we have some clarity now that this deal has been announced. The people of Port Talbot and the staff of the plant can now know what the future is, when last week they did not. From my point of view, that is one of the most important flags for the future. It gives us the opportunity to have the structure around which to have proper consultation, which the company is obliged to take part in and would want to do so in any case. So some of these questions will be answered in the near future and I am grateful to the noble Lord for his question.

[Lord Anderson of Swansea (Lab)]

My Lords, as the only person present who lives in the area and knows the decades-long dependence of Swansea Bay city on the steel industry, I say that it is sad that it is the local community that is now likely to pay the price of green steelmaking. How many jobs will be lost? Is it accepted that it will be 3,000? Can we be assured that there will be an attempt to synchronise those job losses and any incoming jobs at a time when there are few large investments in prospect and increased competition? Finally, is there a danger that the transformation will lead to increased imports from countries not subject to the decarbonisation process?

[Lord Johnson of Lainston (Con)]

I thank the noble Lord for his questions. On the last point particularly, we are very aware of the need to ensure that our carbon border pricing mechanisms are properly implemented. In this House, we are all aware of the situation of competitive imports that we face in this country, which the noble Lord alluded to. We have been particularly forward-footed in ensuring that our World Trade Organization tariff processes are well deployed in order to protect our economy.

On the question asked by the noble Lord on the synchronicity of the Celtic port investments and the transformation of Port Talbot, we are doing everything we can to ensure that that would be the case. Clearly, it is very difficult, but this is a long-term process. The noble Lord was absolutely right to raise it. It is our intention, through this extraordinarily forward- footed and bold investment partnership with Tata, and working with the freeport and the ports companies operating there, to truly transform this area that the noble Lord has such affinity with into the most astonishingly vibrant, advanced manufacturing and industrial hub.

[Baroness Randerson (LD)]

My Lords, the process, as the Minister acknowledges, will involve redundancies. Those redundancies will have huge community impact, as will the change in the nature of the plant at Port Talbot. Many of those community impacts will fall under the powers of the Welsh Government: education, retraining of the staff involved and huge environmental impacts—some of them for the better. But it will be a period of transition.

That will mean that it is absolutely essential that the UK Government work closely with the Welsh Government. I have been struck by the Minister’s unwillingness to refer to the Welsh Government and the vagueness of his answer about the role of the Welsh Government so far. Can we have a commitment from him now that, in future, there will be full co-operation, joint working and confidence between the UK Government and the Welsh Government to help these people as the transition occurs?

[A noble Lord]

Hear, hear!

[Lord Johnson of Lainston (Con)]

I am grateful for the noble Baroness’s comments—I “hear, hear!” them too, although I would push back slightly on the point that I have been vague in my comments about working with the Welsh Government because I have not mentioned them so far, but I am now given the opportunity to do so. It is extremely important that we engage very closely with the Welsh Government. I can, very comfortably, commit to all sides of this House that we will engage as much as possible with the Welsh Government to ensure that we have good outcomes.

For those noble Lords who question the power and value of the union, this is one of the greatest examples I can give them of the power of the union in recent memory—the UK Government nationwide serving the interests of the people of Wales and the Welsh Government. This is a partnership between the UK Government and the Welsh Government, and one that could not be more powerfully written than in the sheer financial, emotional and strategic support that we are all giving to this incredibly important transformation.

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, my noble friend Lady Chapman, at the end of her remarks, asked about the national security case for steel-making and the national security concerns about making our own steel. I do not think that the Minister answered that point at all—the words have not passed his lips so far—so I would like to give him another chance to answer my noble friend.

[Lord Johnson of Lainston (Con)]

I am very grateful to the noble Lord for giving me an opportunity to repeat myself, because I thought that I was quite clear that I am not able, at the Dispatch Box, to make industrial commitments on that scale—and he would not expect me to. We still have one steel mill in Scunthorpe operating with blast furnaces that can produce virgin steel. I am not a technical expert, but I hope that noble Lords will bear with me when I say that the processes are now close enough to being able to produce the steel almost to the quality that we need for all the uses that we require it for. We are not quite there yet, but we expect to be, and work is being undertaken to ensure that we can do that in the future.

What we have been able to do is make us more resilient. The noble Lord talked of national security, but I never felt that we were particularly nationally secure by having to import, in effect, all our ore in order to make the steel that we then roll. So here we have the opportunity, at last, to be secure, to take advantage of the circular economy and to use the scrap currently going abroad—totally bizarrely, in my view—to mill it in this country. That will allow us to have the circular economy that will give us far more security than a necessity to produce virgin steel on our own simply through imported ore.

[Baroness Royall of Blaisdon (Lab)]

My Lords, my noble friend asked for confirmation of the number of job losses. I think that the number of 3,000 was mentioned, but it would be helpful for your Lordships to have confirmation.

[Lord Johnson of Lainston (Con)]

Again, I appreciate very much the questions on this extremely sensitive and complex area. It is not the Government who run Port Talbot steelworks or Tata Steel, so I am not able to give a specific figure. We are projecting that at least 5,000 jobs have been saved through this move, and we think that tens of thousands of other jobs will be created through the release of land and the transformation of Port Talbot and the freeport area. I hope that that gives the noble Baroness some security.

[Lord Touhig (Lab)]

My Lords, perhaps I misunderstood, but the Minister seemed to suggest that it was not possible to engage with the workforce before this announcement because there was some sort of commercial sensitivity. What commercial sensitivity would have been at risk from telling the workers that there were to be substantial job losses? Following the comments made by the noble Baroness from the Liberal Democrat Benches, the Minister has now engaged on working with the Welsh Government. Do the Government have a specific package of proposals that they intend to put to the Welsh Government to work in partnership to find new and alternative employment for the people who will be made unemployed in that part of Wales?

[Lord Johnson of Lainston (Con)]

I thank the noble Lord for a point well made. The Welsh Government and the UK Government are working together on a transformational transition board. Forgive me for not having the specific nomenclature for it, but it is a collective group led by the UK Government, with participation from the Welsh Government, to ensure that there is strong transition for the people and communities most affected. That includes £100 million, with a substantial contribution from Tata, to ensure that there is money available for that transformation and the transition for the affected individuals and communities. That is a very important commitment. As I said, if we look back 40 or 50 years, it was perfectly reasonable for the charge to be raised that there was not enough done to allow communities and individuals to transition properly from one industrial position to another—that is something that we will not allow to happen. It is absolutely essential that we work closely with the Welsh Government; I see this as a partnership between the two Governments of the UK and Wales. As I responded to the noble Baroness, this is the exact benefit of a strong United Kingdom and a strong union.

I will return again to the point raised about the consultation process on this commercially sensitive and complex arrangement. It is impossible to know what the ramifications of a transformation will be until you have decided what the funding and financing behind it will be. Tata is investing over £1 billion in this transformation programme and the UK Government are putting in £500 million. Until that had been confirmed, it would have been impossible—noble Lords must surely realise this—to know what the future of the site and its industrial capability would be, and, as result, what the projections on the consultations for employment would be. I have great sympathy with both the Government and Tata for making sure that there was a high degree of confidentiality around the specific deals. But make no mistake: this discussion has been going on for a decade and the outcome is no surprise to anyone in this House or in Port Talbot. What is a delight and to be celebrated is that we have come to a decision; people no longer have to worry about a decision that has not been taken. Now we can get on with the job of delivering a transformed Port Talbot steelworks, a strong partnership with Tata and a very strong partnership between the UK Government and the Welsh Government.

[Lord Berkeley (Lab)]

My Lords, the Minister will be aware of the great interest from his colleagues in the Department for Energy Security and Net Zero about offshore wind farms in the Celtic Sea. A number of us have been attending meetings about where these would be located and where the shore stations would be, if we can call them that. I live in Cornwall and felt fairly miserable that they could not be built there because there is no flat land big enough for those enormous great tanks to be built—although that is fair enough. Obviously, Port Talbot comes top of the list for having a large number of flat areas and decent quays and, until now, the right steel-making facilities. Is anyone, between the Minister’s department and the energy department, talking about how those facilities could still be built at Port Talbot, even with a new electric arc furnace? Is it the right type of steel, and is there enough space? Presumably, it will create some jobs, which I hope will be welcomed.

[Lord Johnson of Lainston (Con)]

My Lords, I am very grateful to the noble Lord for his comments. I am afraid that I was not entirely clear on some of the points he made, but, as I understood it, he was looking for clean energy supply to the Port Talbot facility. There have been a number of discussions on that, and I share his view on, and enthusiasm for, offshore wind—particularly floating offshore wind—and I believe that all these options are being explored. They will create a huge amount of inward investment, a huge number of jobs and an enormous amount of innovation. The UK is leading the way, as noble Lords know, on the provision and building of offshore wind capabilities.