Sector Deal for Steel

Nick Thomas-Symonds Excerpts

Tuesday 19th December 2017 Westminster Hall

[Stephen Kinnock]

My right hon. Friend is right. That was an important milestone, but there have been so many false dawns, and warm words matched by frozen actions.

[Nick Thomas-Symonds (Torfaen) (Lab)]

I congratulate my hon. Friend on securing the debate and on the great work that he has done over a significant period to stand up for the steel industry. On the subject of broken promises, does he agree that investment in research and development is another big issue? Across the UK generally it remains stubbornly below the OECD average. The whole sector is now asking for increased R and D investment in steel, and the Government should deliver that.

[Stephen Kinnock]

My hon. Friend makes an important point. I think that in the minds of some Ministers, and others in the House, steel is seen as metal bashing and an almost primitive industry, but in fact it is at the cutting edge of many innovations that we desperately need to drive our economy forward. If we are serious about getting a broad-based manufacturing renaissance, it must start with investment in the steel industry.

It was clear that Tata’s initial preference was to close the business down rather than sell it, but thankfully we managed to persuade the company to shift its position from closure to sale. Thanks to the magnificent professionalism and dedication of the workforce and steel unions, the turnaround plan began to kick in. The performance of the business dramatically improved, and from a fire sale we got the slow burn that eventually morphed into Tata’s decision to remain. However, that happened only after the workforce, facing the prospect of either the closure of the Port Talbot works or the closure of their pension scheme, voted for pension restructuring. They put the future of their industry, livelihoods and communities before all else. Steelworkers and steel communities are like no others. If my hon. Friend the Member for Redcar (Anna Turley) were well enough to be here today, she would have told us of the incredible strength and resilience of her community, which has stood firm, united and resilient, just as she has fought tooth and nail for it since the closure of the works.

There have been many ups and downs in the British steel industry in the past few years, but three things remain constant. The first is the relentless passion and commitment of steelworkers and their communities, exemplified by the delivery of the turnaround plan and the vote on the restructuring of their pension scheme. The second is the Government’s indifferent and incompetent attitude, and the third is the key policy asks of the industry—business and workforce—which have remained fundamentally unchanged for well over two years. We have discussed those policy asks many times, but it would be remiss not to take the Minister through them, as this is her first time attending such a debate.

To take trade defence first, we asked the Government to stop blocking reform of the lesser duty rule, which means tariffs that we can impose on illegally dumped steel are capped at 16%, while the Americans can impose far higher duties. The Trade Bill is set to transfer the lesser duty rule to UK legislation after Brexit. We asked for meaningful action against illegal Chinese dumping, with proper trade defence instruments. However, as steelworkers were being shown the back door, No. 10 was rolling out the red carpet for Beijing. What was the result? We can now add the challenge of illegally dumped Russian and Turkish steel to that of Chinese steel.

Secondly, on business rates, there have been five Budgets in the past two years, and not one has acknowledged the industry’s concerns about the way business rates inhibit investment and hold us back from investing in plant and machinery; so of course no remedy has been proposed.

Thirdly, on the question of procurement, which I have been working on extensively with my hon. Friend the Member for Cardiff South and Penarth (Stephen Doughty), the Government have utterly failed to translate their rhetoric into reality. The public interest test that they introduced proved inadequate. Our calls for a longer lead-in time for central Government contracts have fallen on deaf ears. The Government have resisted transparency, dumping the idea of mandatory reporting and refusing even to gather and hold the relevant data, let alone provide it to us whenever we have asked. Foreign steel has continued to be used on iconic projects such as the repair of Big Ben, the new Firth of Forth bridge, the new Type 26 frigates and all sorts of smaller refurbishment and development projects around the country.

On the most vital of issues, energy prices, there has been some tinkering at the edges but no attempt at all to tackle the root causes of our ludicrously uncompetitive energy costs. The Government found a chaotic resolution to the EU emissions trading threat—something that would have cost the steel companies tens of millions of pounds, owing to the mishandling of Brexit—but they have singularly failed to clear changes to the feed-in tariff and renewables obligation opt-out. On the central issue of energy pricing, which means that UK producers’ energy costs are more than 50% higher than those of our European competitors, nothing has been done, and it appears nothing will be done.

That brings me to the very matter that we are here to discuss: the sector deal for steel, which hinges on the issue of energy pricing. After publishing the industrial strategy White Paper, the Government asked all industries to present their sector deals—comprehensive packages about how their industry would work within a national industrial strategy. The steel industry did just that, by presenting a sector deal to Ministers that met all the requisite criteria back on 7 September.

That deal would see a 50% increase in investment, from £200 million to £300 million per year—an additional £1.5 billion of investment over the next five years. It would increase production capacity by 40%, from 10 million tonnes to 14 million tonnes a year. It would create 2,000 jobs, and would see 200 more apprentices trained every year. It would develop a low-carbon roadmap, and help to deliver a more efficient electrical system, almost doubling the industry’s demand-side response. It would see the industry pump an extra £30 million investment a year into R and D, which is an area, as my hon. Friend the Member for Torfaen (Nick Thomas-Symonds) pointed out, in which the UK is traditionally weaker than our rivals.

In return for all that value, all the steel industry asks is that the Government match the R and D funding, helping to establish the future steel challenge fund, which would bring together the steel value chain, from automotive to aerospace and from renewables to construction, to work in partnership towards a cohesive industrial strategy and a new kind of growth, unlocking exciting innovation and new opportunities. The deal asks for Government help in facilitating investment by providing access to commercially competitive loans, providing capital investment grants or innovative tax discounts linked to investment. Essentially, that would help the industry to unlock the monopoly on investment held by property speculators and quash the myth that investing in industry is risky.

Crucially, the linchpin on which all this untapped potential rests is energy prices. Our steel producers have to pay 55% more than their German competitors and 51% more than the French, which adds up to an additional cost of almost £50 million a year. As the sector deal makes clear, if the steel industry gets the help it needs, it will put every penny and more of that £50 million back into the industry, creating jobs, increasing capacity, innovating and creating new opportunities and value.

[Nick Thomas-Symonds]

Does my hon. Friend agree that there is wide support for the sector deal right across the steel sector? It makes sensible and innovative proposals. Why do the Government not simply adopt it?

[Stephen Kinnock]

I agree with my hon. Friend. The sector deal has been submitted under the umbrella of UK Steel and EEF, but with the full participation and support of Tata Steel, British Steel, Liberty Steel, Celsa Steel and a number of other key players in the sector. The steel industry really speaks with one voice on this.

Without a cost-competitive energy environment, steel companies cannot invest in the future, and the industry can survive only when it has the potential to thrive. Steel is too important a product for our economy, our security, our communities and our standing as a nation for us to have to rely on others for it.