UK Steel Industry

Nia Griffith Excerpts

Wednesday 3rd December 2014 Westminster Hall

[Stephen Doughty]

I wholeheartedly agree. My hon. Friend mentions the Community union, which has many members in my constituency and those of other Members present. It provided a helpful briefing for this debate and continues to speak out with a strong voice on these issues. Community estimates that the energy prices faced by UK steel producers can be 50% higher than those faced by our main European competitors, such as Germany. The Minister might not be aware of this, but green levies in the UK are two to three times higher than those faced by European competitors.

I firmly believe that we need a responsible and supported transition to a low-carbon economy, but it would be absurd if ill-fitting policies for this and other energy-intensive industries resulted in carbon leakage that leads to higher global carbon emissions. The Celsa plant in my constituency uses recycled steel in a carbon-efficient process, and it would be a tragedy if some of that production was lost to China, where the same carbon emissions standards and local environment standards would not be followed.

Earlier this year, the Chancellor said that manufacturing continues to play a key role in the UK’s economic recovery, but that the cost of energy acutely impacts on the international competitiveness of the sector, particularly for energy-intensive industries. I agree, as I am sure do many of my colleagues and the French and German Governments, but actions speak louder than words. Where the UK Government has failed to act robustly and urgently to level the playing field, others around the world have been taking action, including Germany and France. Unfortunately, that is leaving the UK at a disadvantage. As a close observer of what happens on the continent, the Minister might know that the French Senate recently debated finding a mechanism to fix the electricity cost for energy-intensive users at a maximum of €30 per megawatt-hour, compared with the €73.50 per megawatt-hour in the UK. That is a stark contrast.

The Minister might be aware that there has been extensive correspondence between the Department for Business, Innovation and Skills and me and other Members on these issues. The announcements in the Budget earlier this year on an energy-intensive industries compensation package were welcome, but many of the measures will have no immediate impact, which presents a serious risk.

My hon. Friend the Member for Newport East (Jessica Morden) mentioned this issue. I was deeply disappointed by the Chancellor’s answer today. I simply asked whether he was content with the decision—I had been told that the Minister for Business and Enterprise, the right hon. Member for West Suffolk (Matthew Hancock), would be responding to the debate, and I am disappointed that he is not here—that he and that Minister made not to bring forward that package. That decision is deeply disappointing to many of the steel producers in this country.

I am sure that the Minister has received many bulging red boxes full of cautious and bureaucratic advice from officials on the issue, but it is ultimately a political decision for Ministers to interpret European guidelines and decide whether there is a possibility of retrospective exemption and renewable sources support compensation. The bottom line for our steel producers is that in practical terms many of them are paying more taxes than they paid three years ago. They are finding themselves at a growing competitive disadvantage. The Minister’s cautious approach stands in stark contrast to the proactive and decisive one taken by Ministers in other EU member states. I am sincerely asking whether he and his ministerial colleagues will take another look at this crucial issue.

[Nia Griffith (Llanelli) (Lab)]

Does my hon. Friend agree that it was the unilateral imposition of the carbon floor price at a particular rate that has caused the problems? The steel industry is not asking for charity; it is simply asking for a level playing field. We want the situation put right as soon as possible.

[Stephen Doughty]

I wholeheartedly agree with my hon. Friend’s points.

On another issue, the Minister here today will know that business rates are one of the few taxes that are non-cyclical and fixed at a level irrespective of economic or market conditions. As such, business rates are treated by industry as a fixed cost, which is given much greater prominence when making investment decisions. According to the industry, the fact that business rates are five to 10 times higher in the UK than in EU counterparts represents a significant comparative distortion that undermines the UK as a destination for investment.

Will the Minister say whether any consideration has been given to removing plant and machinery from the business rates valuations? What about alternative approaches for large-scale manufacturers, with a view to adopting a simplified model based on capital values rather than hypothetical rental values?

I come to foreign dumping, responsible sourcing and supply-chain access, huge issues for UK-based steel producers—and the environment is changing all the time. We have been shown some shocking statistics. I mentioned the reinforcing bar produced by Celsa in my constituency. Hopefully, the Minister has seen the data that show that imports from China now account for more than a third of overall UK market share, which is a dramatic increase in recent years; the figures for this year show an even greater increase. We also see problems with imports from Turkey.

There are also questions about traceability in the supply chain and the fact that the classification of such products often does not meet British standards. In the extreme, that has potentially serious implications for the future structural integrity of buildings or infrastructure projects in which non-compliant rebar or other steel products have been used.

The UK Certification Authority for Reinforcing Steels has been too slow and ineffective in its response to date. Quite frankly, the Government’s response has also been disappointingly slow, given that I understand that misclassification was raised at the steel contact group in October 2013 and again in June 2014.

[Stephen Doughty]

I thank my hon. Friend for those well made points; I wholeheartedly agree with them. On traceability and the quality of products used, the Government could do something right away: ensure that all Government or Government-backed projects have a robust, responsible sourcing requirement.

As I have said before, although the Government’s sector- by-sector approach is welcome, it must be dramatically accelerated. That would, without doubt, serve to stem some of the questions about safety and sustainability rightly coming from concerned people inside and outside the industry. Reports that Chinese rebar has been failing British standards tests coupled with the news that one third of rebar used on UK sites is Chinese should have red lights flashing on ministerial dashboards, not only in BIS but in other Departments.

[Nia Griffith]

Does my hon. Friend share my disappointment that Ministers, in their reply to the steel group, rather brushed aside any option to intervene in what CARES is doing? Will he reiterate to this Minister the need for them to look at that thoroughly?