Steel Industry

Lord Suri Excerpts

Tuesday 25th April 2017 Lords Chamber

[Lord Suri (Con)]

My Lords, I welcome the opportunity to speak in this debate. As we look forward to another election, we should not let issues that do not dominate the agenda slip out of focus, and this is a particularly important issue. It is important, I think, not just for the industry that it concerns but for the wider issue of the industrial strategy. Unlike many in the other place, I think that most noble Lords here will have memories of the old days when the industrial strategy occupied a more central role in government and, indeed, had an entire department structured around it. If the former Members for Chingford and Henley were present, they would have more knowledge than me about that, having been the Ministers responsible. Trade tariffs and dumping were vexed and vexing questions then, and little seems to have changed.

Through the years, I have stuck to the uncompromising view that low tariffs and minimal impediments to trade are the most effective policies for improving growth, and they have the pleasing effect of helping those at both ends of a deal who, after all, are exchanging one thing for another of higher value. The steel industry is an interesting case in point. After we leave the EU, I hope that we will be subject to some sort of deal. It appears that customs union membership will not be part of that, and Ministers will be hassled by the Opposition and special interests to whack up steel tariffs in a post-Brexit round of reviews of industrial policy. However, I feel that to do so would be completely the wrong approach.

Before I make the substantive case, I will make one comment against certain jingoistic points that I have observed. You can indeed buy British steel to build roads and hospitals, but if British steel is consistently more expensive, you will have to build fewer roads and fewer hospitals with your limited budget.

An industrial strategy that works will need to be focused on the work of supporting winners, not picking them. In the post-war economy, which was far more heavily subsidised than now, productivity and efficiency rocketed as subsidies were withdrawn. Services are our real comparative advantage, and they are outgrowing almost all other sectors. They must be helped to grow and expand by our trade strategy. We should insist that all free trade deals on goods be accompanied by some agreement on mutual recognition of regulatory quality of services, or mutual recognition of degrees. Services must feature in the industrial approach to trade.

The primary benefit of this strategy, rather than subsidies, or trying to grow industries from scratch, is that it puts relatively little pressure on the Exchequer. A few guarantees like additional export finance may be put in place, but are tiny to heavily subsidised industry. If the market sees fit for an industry to survive, it will step in with the necessary investment, as ArcelorMittal is showing with Welsh steel plants. Supporting industries with large subsidies when they may not even be close to returning to profitability is an expensive folly. If other countries choose to pursue that policy and then let us benefit from cheap exports, that subsidy has been passed to us and need not be retaliated to. Inefficient industries supported well beyond their time create huge issues. It is not just that they soak up capital that could be used more efficiently, but that the planning is never put in place for their eventual demise.

We should take the lesson of the 1980s and make strong plans for industries in a declining phase. Workers must have strong support and meaningful alternative career options. In this post-Brexit world with lower immigration, there is plenty to do.