Steel Industry

Peter Bone Excerpts

Thursday 3rd November 2016 Westminster Hall

[Tom Blenkinsop]

I thank my hon. Friend for raising that. There are a number of issues within that general question that still hang over the industry. I am at pains to talk about the broader industry and the new, smaller companies that are emerging. The debate tends to be dominated by issues around Tata, for obvious reasons, but we need to look at how we develop smaller companies, hence our desire for the steel sector catapult to be established. Although those smaller companies have come to the fore, they have told me directly that if a steel sector catapult existed, they would have been able to get where they are now a lot quicker and with a lot less capital, which would release more capital to do other things or to develop other research and development potential. One of the most profound issues, which I will go into later on, is the British Steel pension scheme.

Producing steel is a massively energy-intensive process. Despite the Government’s policy, which compensates energy-intensive industries for the disproportionate impact of carbon reduction measures on them, British energy prices are still far higher than those in Germany and elsewhere in Europe. The steel industry is aware of the need to transition to low-carbon energy sources, but only in a way that makes business sense.

Everyone I have spoken to in the steel industry welcomes the inclusion of the energy portfolio in the same Department as the business and industry strategy portfolio. That makes sense, and it is about time it happened. However, the Department has yet to respond to the EEF’s five recommendations aimed at addressing the competitiveness of UK energy costs. Since the initial meeting with the Department for Business, Innovation and Skills on this issue in June, EEF estimates that the disparity between UK and European energy costs means the UK steel industry has paid £20 million more in energy bills than their continental competitors. What is being done on energy costs? What benefit has the sector felt since the creation of the Department for Business, Energy and Industrial Strategy?

[Mr Peter Bone (Wellingborough) (Con)]

The hon. Gentleman is making an excellent speech. Can he explain why energy costs are so much lower in continental countries than here? Is it something that we as a Government are doing wrong, or is there some other reason?

[Tom Blenkinsop]

Other colleagues may want to comment on this, but my view is that in general the energy sector is predisposed to giving the individual consumer cheaper prices, with the costs going more towards manufacturing. The consequences of that have led to some manufacturers going off grid; and a consequence of that may be higher prices for the individual consumer, as capacity cannot be fulfilled by larger consumers. In European countries such as Germany and Holland, there are discounted energy costs for large manufacturers but with the understanding that the individual pays higher bills. There is consensus, to a certain degree, that people are willing to pay higher energy bills in order to maintain manufacturing in their country so that they have a job—but that is with open political consensus. We as politicians need to talk about what type of economy we want. Do we want to move it away from finance and services back to a more balanced economy? We need to talk about that in terms of energy policy, but I will go into that issue in more depth later.

The Government can act to support the steel industry’s attempts to improve its energy efficiency and thereby cut emissions and costs by providing an energy efficiency fund. Such a fund could supply capital for companies to make improvements and efficiencies in the way they use energy, meaning they can better compete on energy prices and millions of tonnes of carbon emissions can be cut.

The second immediate challenge is that of the British Steel pension scheme. The scheme’s deficit, estimated at £700 million earlier this year, has been a major obstacle to the sale of Tata Steel sites. In response to that, the pension scheme’s trustees have asked if it would be possible to alter the scheme’s benefits in order to make it viable without a sponsor employer. The Government have been consulted on that option and on the alteration to section 67 of the Pensions Act 1995 necessary to alter the scheme’s benefits. We are yet to hear a statement on the consultation, but recently the pensions deficit has been drastically re-estimated at £50 million, due to the trustees taking advantage of the post-Brexit economic situation—I must mention that that has more to do the British Steel pension scheme’s investments in other nations’ stock, which has boosted the pension fund.

If interest rates were to rise and the scheme’s asset value continued to increase, hypothetically the trustees may wish to withdraw their request to change the scheme’s benefits, and therefore a change in section 67 of the Pensions Act may not be necessary. The compounded complications are that any change to section 67 could affect any other workplace pension scheme, and any other representative of any other constituency without a steel interest would be highly hesitant about voting for such an action. I hope we can keep in constant contact with the Minister, so that if the scheme’s benefits continue to rise, we can look at measures short of the scheme falling into the Pension Protection Fund, because that is fundamental to the existing Tata sites. The Government must act to explore that possibility, provide certainty in an uncertain situation and secure the continued viability of Tata Steel sites. The BSPS is a fulcrum of the continuation of the current Tata sites.

As well as the five asks, strategic decisions will need to be made soon by Government that have the power to end or secure the industry’s future. Those are decisions that come in the wake of Brexit. There are many implications for the steel industry of the UK leaving the European Union, from workers’ rights to an ability to attract expertise and investment from the continent, but I wish to focus on one: trade, and in particular access to markets and trade defence measures.

Earlier this week, I warmly welcomed the Government’s actions to secure investment, jobs and growths at the Nissan plant in Sunderland, via the production of the two new Qashqai and X-Trail models. That move is warmly welcome, not least because Nissan is one of the largest buyers of British strip steel, largely from Tata Steel sites. It is a shame the Government did not take the same decisive action when it came to the closure of the SSI Redcar steel plant over a year ago, which I am certain my hon. Friend the Member for Redcar will talk about. None the less, it seems the Government have reassured Nissan that it will have access to European markets tariff-free. That is fantastic news, but it is not just Nissan or the automotive industry that rely on access to tariff-free trade with Europe.

Over half of all British steel exports are to the European Union, therefore any tariffs on British goods would damage the health of UK steel. I hope the Minister will commit today to providing steel producers with similar assurances. Doing so would again demonstrate this Government’s commitment to the sector, and of course do much for those whose jobs who are dependent on the steel trade. The Nissan deal also reflects how big and powerful the industry players and the automotive lobby is as a whole. Steel requires its players to come together and command such attention. It must also gain the understanding of the auto sector and all the other industrial lobbies that the UK steel supply on their doorstep requires their clear verbal support.

Leaving the European Union presents both an opportunity and a threat in terms of trade defence measures—a threat in that it means we would leave behind the trade defence measures provided by the EU, modest and limited though they are, and an opportunity in that it allows this country to implement our own trade defences. As many here will know, the over-production of primarily, though not exclusively, Chinese steel and its dumping, sometimes at below-cost prices, in foreign markets poses a real and significant threat to industry here in the UK. Currently the EU’s tariffs on steel differ by product: the highest import duty is about 73% on heavy plate steel, whereas in the US in March duties were set at over 265%.

While Chinese production of steel did slow as global demand dipped, the latest International Steel Statistics Bureau statistics show that Chinese exports remain at a year high, with August levels being some 7% above last year. The problem is not going to go away; it will certainly re-emerge. However, this Government seem to have set their face against trade tariffs on Chinese steel, as two quotes reveal. The first, from the Chancellor, was on granting China market economy status. He said:

“Our position on China’s market economy status is that we gave certain undertakings to China and believe that we are bound to go down this route.”

Recognising market economy status for China would limit our ability to apply duties on Chinese steel, potentially opening up our markets to a flood of cheap steel, undercutting domestic producers and risking thousands of British jobs.

Commitments made to endear ourselves to China should not take precedent over commitments to steelworkers or common sense. It is obvious that Chinese steel is not made under market competition conditions, and it is also obvious that by campaigning for MES for China, the Chancellor is campaigning against the interests of British steelworkers. This may be further complicated by Brexit. If we campaign for market economy status for China—as a country, I add; that is the Government’s position—while we are in the EU, will not this Government be obliged to recognise that once we can do so unilaterally after leaving the EU? Perhaps the Minister can shed some light on that.

The second telling quote came from the Secretary of State for International Trade. During his speech to the Conservative Way Forward group, the right hon. Gentleman, now infamous for calling British business people fat and lazy, said we

“must turn our backs on…voices that tell us: ‘It’s OK, you can protect bits of your industry, bits of your economy and no one will notice’”.

That seems to set the right hon. Gentleman against any industrial strategy and certainly against trade defence measures for the steel industry. I hope that that misapplication of free trade dogma to trade with a communist country and its state-owned and subsidised steel industry does not spill over into Government policy. I hope Ministers from BEIS have explained the absurdity of that position to the Secretary of State; if not, I fear someone will have to very soon. Those two aspects of the Brexit negotiations are fundamental to any industrial strategy and I hope the Minister will outline today the conversations he has had with and the cases he has been making to the Chancellor, the Prime Minister and the Secretary of State for Exiting the European Union about Brexit and our industrial strategy.

I would like now to address my own Front Benchers. As a party, we have been vocal in campaigning to save our steel industry, and we should be proud of that, but, if our party is to help to revive the steel industry in the UK, as I hope it will, and not merely be its pallbearer, we must stop cutting off potential demand for British steel by opposing or sitting on the fence over major infrastructure projects. Heathrow will require 370,000 tonnes of steel and could support hundreds of jobs in the industry. Labour does not seem to have a settled opinion—I know mine—and we must be clear. Trident will support British jobs in the steel industry, despite the Government allowing French steel to be used in the vessels’ hulls, but Labour’s own leadership casts doubt on our commitment to this project, despite party policy and a consensus at our conference and among trade unions to accept it.

Shale gas is an example. Our party has vowed to ban the practice of fracking. The GMB union called this decision ridiculous, nonsense and madness, and my union, Community, said the decision was rushed and did not fully consider the evidence. Both unions have since signed a memorandum of understanding with United Kingdom Onshore Oil and Gas, the industry trade body. Two proud unions, with large private sector bases and affiliated to our party, are asking the party to back a proposal that would provide jobs in regions across the UK—not just jobs, but secure, well paid jobs that would help to stop our reliance on autocratic nations for our energy. It would offer people, not least the thousands of offshore oil workers being made redundant, well trained, highly skilled, long-term roles, but we have denied them that option. Shale gas would cut energy prices for the steel industry more profoundly than any tax break or subsidy. On Teesside, it would provide a gas supply to a much-needed chemicals industry at 50% less than the cost of conventional North sea gas.

The infrastructure and sites would also require thousands of tonnes of steel. The viability of British-made welded steel pipes for fracking is currently being explored. It is vital to both Corby’s and Hartlepool’s pipe mills. The industry is moving ahead without the Labour party. We should be shaping the shale gas industry, not ignoring it for our own satisfaction. We should be making sure it is safe, that it uses British steel, that energy price cuts are passed on to steel producers and that they organise their workforce so that it can bargain collectively and secure benefits for local communities.

Blanket opposition to infrastructure projects may offer the false comfort of the moral high ground, but it is not responsible. Failing to make these choices is not the action of a Government in waiting who intend to deliver for steelworkers. As a party, we must be pro-jobs and pro-steel choices, and not just attend marches and wear badges. I hope my party will think about these issues and choose jobs over familiar, fashionable and flawed opinion.

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[Tom Pursglove]

I thank the hon. Lady for her intervention. The point that I am making is that outside the European Union, that will be entirely within the gift of the British Government. We will not have to get agreement from multiple member states to make progress on these things. I have consistently said that I think we should look at the tariff side and, where there is flexibility and opportunity to increase tariffs in response to particular problems, we should look to do that.

[Mr Bone]

My hon. Friend has been a champion of Corby steel since the day he became the Member of Parliament for Corby. The one thing that I want to pick up on in these exchanges is that people talk about “the Government”. We have a new Government, a new team, a new Prime Minister and new Ministers. Does my hon. Friend the Member for Corby (Tom Pursglove) agree that we have seen a different attitude to steel since we have had a new Prime Minister?

[Tom Pursglove]

I am grateful for the intervention. I certainly agree with that point and will touch on it later.

Of course, there is a particular challenge with the current tariff situation. Ministers have said consistently that one difficulty has been that some of the tariffs are bound up with other things; the impact on other things also comes into play. It would be much easier outside the European Union. We would be able to take those decisions ourselves. We would be able to take the decisions in isolation, separated out, and not have to get that wider agreement from other nation states.

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[Mr Peter Bone (Wellingborough) (Con)]

It is a great pleasure to follow the hon. Member for Penistone and Stocksbridge (Angela Smith), whose speech was very good—for at least the first two thirds. It was a very good speech and she made a strong case for the special steel produced in her constituency. I also liked the plug at PMQs for the Prime Minister to do her best when she goes to India. Years ago, I was on the Select Committee on Trade and Industry and I remember a huge business tycoon from India. I asked him, “What is the one thing we could do to boost trade between our two countries?” He said, “Pull out of the EU.” At that time, of course, nobody ever thought that would happen, but now he will get his wish. Absolutely, too, on shale gas, that makes obvious sense.

I also congratulate the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop). I always think that Westminster Hall is where we have the best debates. We do not get the party-politics nonsense that we sometimes have in the main Chamber. The way in which he made his speech will allow the Minister to deal with it in a very grown-up fashion. It was also particularly courageous to make the points he did against his party’s current policy in some regard. I will return that, I hope, and say some of the things that I think have gone slightly wrong in the debate on steel.

My interest is also connected with that of my right hon. Friend—sorry, my hon. Friend the Member for Corby (Tom Pursglove); he should be right honourable. My constituency abuts his, and a lot of my constituents work in and supply goods and services to the Corby area. I suppose I should also declare that I spent 13 years in south Wales and regularly played cricket close to the steelworks—off my bowling, the ball quite often landed in the steelworks.

As all hon. Members here will probably say, British steel has a future. Not only that; it has to have a future. It is a strategic industry. There have been two Governments recently—the one under David Cameron, and the new Government, under the new Prime Minister—and there has clearly been a shift in emphasis. What I would criticise about the previous Government is the slowness with which they did things. Very early on, when there was clearly a lot of working together and establishing things that needed to be done, such as reforming business rates and dealing with energy costs, the previous Government said, “Let’s deal with Chinese dumping.” But we did not seem to be getting there as quickly as we should have. With the new Government, things have moved on a lot.

Let me deal with the thing about free trade, the Chinese and dumping. Yes, a lot of us believe in free trade because we think it benefits everyone, but free trade does not mean that one country can dump its products in another country. Countries cannot sell their products below cost or with huge subsidies. The reason it is done, of course, is that with things such as steel, there are large fixed assets. The marginal cost of producing the steel and selling it at a loss allows those fixed assets to be kept. That is exactly what the Chinese are doing, which is why we should impose severe tariffs—not for protectionism, but because they are dumping. As any free trader will say, dumping is absolutely not allowed. I listened to the arguments about how dumping would work or did not work in the EU. I think my views on the EU are pretty clear, but we are where we are now and we must look at the advantages.

Let us look at the single market argument. I have only been in Parliament for 11 years. Before that, I was in the manufacturing business. Of course, exporters want to have something that other people want, and they want to be able to sell it. If a tariff exists, and the exporter pays the tariff and sells the product, that is fine, but it is better not to have the tariff in the first place. The exporter wants free trade access to their customers, which is not the same as a single market. If we did not have that, and there were world trade rules, exporters would pay a tariff. But let us look at what has happened since we have come out—since the referendum.

[Nic Dakin]

We have not come out yet.

[Mr Bone]

No, unfortunately we have not.

Since the referendum, sterling has fallen by, say, 17%. That makes exports to the EU 17% cheaper and exports into the UK from around the world 17% more expensive. Therefore, a small tariff is irrelevant because we have already had a huge dividend from Brexit. There has been a lot of confused talk around the subject. I absolutely agree with putting tariffs on China—and other countries, if they are dumping—but I do not agree with the idea that somehow there will be a huge problem if we have world trade rules because 50% of exports go to the EU. Clearly we have benefited enormously from the devaluation of sterling. I know that a lot of people want to speak today, but we must look at two issues: the benefit of sterling and the fact that we can absolutely believe in free trade while absolutely having tariffs on dumped goods. That is rather important.

Finally—I really do appreciate that there is a time pressure—I agree entirely with having British steel for British goods. Rushden Lakes is a large development in my constituency, and all the steel there is British. Today, the Government announced a new prison for Wellingborough—I apologise that I must leave the debate temporarily to deal with a matter to do with that prison —which is an opportunity to use British steel. There is a great opportunity for us in the future. The work of the all-party parliamentary group and other hon. Members here today has kept British steel on the agenda. I think the new Government have listened, and I am really very positive about the future of steel.

[Geraint Davies (in the Chair)]

Thank you very much, Mr Bone; I hope you are not going to prison for too long. [Laughter.] I will not pronounce Jonathan Edwards the big “P”, but I call him to speak. If hon. Members can limit their remarks to 10 minutes each, we will get everyone in.

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[Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)]

It is a pleasure to serve under your chairmanship this afternoon, Mr Betts. I begin by congratulating my hon. Friends the Members for Middlesbrough South and East Cleveland (Tom Blenkinsop) and for Redcar (Anna Turley) on securing this vital debate. I also congratulate all my hon. Friends who have spoken. I welcome the new Minister to his place. The irony is not lost on me: I am a daughter of a steelworker addressing a Minister who has a family link with steelmaking. I think I heard that at the beginning of the debate.

The number of Members who have spoken today speaks volumes about the importance of the issue. It is a pleasure to be among this dedicated group who have been fighting for the future of the steel industry with such determination for many months and years. We must pay tribute to the all-party group. I am sure we are all awaiting the forthcoming report. I also thank the trade unions and their officials for their hard work representing their members and supporting them and the wider communities that rely on steel in incredibly uncertain times. Both they and the manufacturers have approached the situation constructively. I thank the Daily Mirror for its ongoing “Save Our Steel” campaign, which has done so much to keep the issue on the political agenda and to raise wider awareness of how crucial the steel industry is to the economy.

The last time Parliament debated the crisis in the steel industry was at the beginning of July, shortly after the EU referendum and David Cameron’s announcement that he would be standing down as Prime Minister. Members were grappling with the consequences of those things for the future of the steel industry. There were a lot of questions, but few solid answers.

Four months on, very little has changed. We have seen the chairman of Tata replaced by his predecessor, but the future of Tata steelworks across the country is no clearer than it was previously. Thanks to the drop in the pound’s value, a slight rise in steel prices globally and, not least, the dedication of our steelworks, there has been a slight improvement over the past few months. However, we must not let an uptick distract us from the fact that the industry is still in a deep existential crisis—it is hanging by a thread.

The industry has had plenty of warm words from both the old Prime Minister and the new, but so far there has been little in the way of practical policy. Although the new Prime Minister has spoken about strategically important industries needing Government support, steel manufacturers are crying out for the rhetoric to be matched by action. We have seen that Ministers are prepared to support industries in need—just look at their recent deal with Nissan. As much as we would all love to know what the deal entails, I appreciate that this may not be the debate in which to discuss it. Nevertheless, I am grateful to the Government for ensuring the continuing presence of Nissan in the UK, not least because the automotive sector is of critical importance to steel. It does, though, prompt the question: if Nissan and the automotive industry can be supported, why not steel?

With all the uncertainty hanging over the steel sector, workforce morale is understandably low. Workers are casting about for alternative careers, and once they have taken their expertise with them, they cannot be easily replaced. They need reassurance that their jobs and their industry have a viable future, and they need that reassurance now. Uncertainty also means a steady shrinking of customer confidence, and there is no surer way to undermine the steel industry than to allow its customers to think that it has no future.

Both the workforce and the manufacturers are united in calling for the Government to take a number of concrete steps. Members have highlighted those key asks this afternoon, and I want to reiterate them to the Minister and ask how his Department will respond to each of them.

The first issue is energy prices. The price of electricity in the UK for extra large users is the highest in the EU, to such an extent that it undermines our competitiveness. The difference means that UK steel manufacturers pay nearly £17 more per megawatt-hour than Germany—the next most expensive—costing the UK steel industry nearly £1 million every week. Industry has put forward a number of proposals to balance that disparity, such as a review of National Grid’s transmission charging regime and a review of the impact of the carbon price floor. However, the response from the new Department for Business, Energy and Industrial Strategy has so far been silence. Now that business, industry and energy are all under one departmental roof, I shall be interested to hear what discussions the Minister has had with his colleagues on the matter.

[Mr Bone]

The hon. Lady is making a very interesting speech. I would like to know—this goes to the heart of some of the problems with energy costs—the Opposition’s view on what should be done on energy prices.

[Gill Furniss]

We have to look throughout Europe and find examples of best practice that we can adopt in this area of work, which is clearly important.

Secondly, there is the issue of business rates. By including plant and machinery in business rate calculations, we are not only at variance with but less competitive than France and Germany, where business rates are as much as 10 times less than ours. We are also creating a disincentive for manufacturers to increase productivity and are effectively taxing investment. Perhaps the best example is in Port Talbot, where Tata invested £185 million in a new blast furnace only to find £400,000 added to their business rates. Our current one-size-fits-all regime for business rates is a hangover from the days when manufacturing dominated our economy. That has not been the case for decades, and we need a tax regime that reflects that change.