UK Steel Industry

Nicholas Dakin Excerpts

Wednesday 3rd December 2014 Westminster Hall

[Stephen Doughty]

I absolutely agree. It is very much the case that from Shotton to Cardiff, from Skinningrove to Llanelli, from Scunthorpe to Middlesbrough and from Newport to Redcar, steel producers are being outflanked by significant challenges, including energy prices, which continue to increase unabated. The rules of the game appear to have changed. I want to focus on a number of strategic issues.

[Nic Dakin (Scunthorpe) (Lab)]

I congratulate my hon. Friend on securing this timely debate. Does he share my disappointment that in the autumn statement the Chancellor did not take the opportunity to bring forward mitigation on the renewables obligation for high energy users, such as the steel industry? That would have been a clear message today that the Government are on the side of steelmakers.

[Stephen Doughty]

I share my hon. Friend’s disappointment. I asked the Chancellor a question on that issue, and I was disappointed that he chose to make a political point, rather than engage with the serious issues being raised by many hon. Members.

I want to focus on a number of strategic issues. Whether it is energy prices, taxation, foreign dumping, uncertain future ownership or the lack of clarity in the UK’s industrial and infrastructure strategies, it is crucial for the sake of our future industrial and manufacturing capacity, as well as for jobs across the UK, that the steel industry has urgent, robust and bold action from the Government, not caution and bureaucratic handwringing alongside many warm words that make little difference in practice.

--- Later in debate ---

[Mr Vaizey]

Hansard has on the record the reason why my right hon. Friend the Minister for Business and Enterprise could not attend the previous debate. I gather that today he is assisting the Chancellor with the autumn statement, because his brief covers a wide range of issues. Indeed, Mr Davies, you are an expert on the working relationship between the Chancellor and the Minister for Business and Enterprise.

[Nic Dakin]

Are we to understand that the Minister is now the Minister for steel, because he has shown far more steel on the issue than the Minister to whom he was just referring?

[Mr Vaizey]

I do not wish to sound churlish, but it is said that one should be beware of Greeks bearing gifts, and one should also be beware of Labour Members, however much one admires them, bearing compliments.

The hon. Member for Cardiff South and Penarth is working hard to secure a long-term future for the steel industry in his constituency. He has been an assiduous champion for Celsa and has facilitated meetings between it and Ministers. I picked up on about nine points made by hon. Members during the course of the debate, but he left me with five or six specific questions, mostly focusing on efforts to mitigate the impact of high energy prices and of competition, which from his perspective is unfair—I hope that I am not speaking out of turn in putting it that way—and on what the Government are doing about things. He also asked about the future strategy for the steel industry.

I have quite a long speech, but the hon. Gentleman spoke rapidly, if clearly, and the time left to me is not long, especially given the level of interest in the debate. I will try to pack in as much in the short period available as he managed.

It is well known that the steel industry is cyclical, and we also know that it has faced particular difficulties in the past few years, especially with the economic downturn having a major impact on construction, leading to overcapacity and severe competition throughout the world. It is worth saying, as I did in the previous debate, that the UK remains a significant player in the global steel market. We have replaced France as Europe’s second largest producer of steel and we have overtaken Italy. It is worth remembering that we continue to manufacture to a high level in this country.

My right hon. Friends the Minister for Business and Enterprise and the Secretary of State for Wales met the hon. Member for Cardiff South and Penarth and representatives of Celsa to talk about the company’s concerns, in particular the policy issues, which it is important to note affect many other steel companies in the UK as well. The Minister for Business and Enterprise replied at the beginning of this week to the letter that was sent out by Celsa following that meeting.

The first major issue raised at the meeting and in the debate today was compensation for energy-intensive industries for the indirect costs of the European Union emissions trading scheme and the carbon price floor. The hon. Member for Cardiff South and Penarth knows that the Government are trying to compensate electricity-intensive industries for the indirect costs of the renewables obligation and the feed-in tariff. We are also seeking to exempt EIIs from the costs of the contract for difference.

The mitigation has not been brought forward, because we need to seek state aid clearance from the European Commission. It took 18 months to obtain Commission state aid clearance for the carbon price floor. The hon. Gentleman and Celsa would perhaps like to see the Government being what they might describe as more robust, but clear state aid clearance is important. As he knows, if aid is provided before state aid approval is given, technically that would be illegal and we run the risk, if approval is not given, that the company would have to pay back the state aid. That is the reason. I am sure that the Chancellor, if he could wave a magic wand, would wish to bring forward mitigation, but we have to go through the process.

The hon. Member for Cardiff South and Penarth also talked about procurement. We have greater transparency of opportunities through the publication of procurement pipelines, which now cover 19 sectors. We have a simpler public procurement system; we have abolished the pre-qualification questionnaires for low-value contracts; and we help suppliers to find contract opportunities via a single online portal. We are working with industry to map supplier capabilities. We want to quantify the opportunity that exists to maximise the economic benefit for the UK—of course we do. Where there are capability gaps, sectors will encourage domestic suppliers to expand to fill them, with support from the Manufacturing Advisory Service.

The hon. Member for Middlesbrough South and East Cleveland tried to tempt me to have a pop at the Scottish Executive over the Forth bridge. My understanding is that the approaches to the bridge are to use British Tata steel, but I cannot comment on the procurement process of the Scottish Executive—[Interruption.] Perhaps the hon. Member for Na h-Eileanan an Iar (Mr MacNeil), commenting from a sedentary position, would like to say why the Scottish Executive procured from China, Poland and other markets.