Steel Industry

Stephen Kinnock Excerpts

Thursday 3rd November 2016 Westminster Hall

[Tom Pursglove (Corby) (Con)]

It is a pleasure to serve under your chairmanship this afternoon, Mr Davies. It is always a pleasure to follow the other Tom, the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), who is a passionate advocate for our steel industry and with whom I very much enjoy working. People out there in the country often take a dim view of the proceedings they see in Parliament, but I believe strongly that the work of the all-party parliamentary group on steel and metal related industries is incredibly important and crosses party lines, which have nothing whatever to do with our work. We all work together for what is best for our steel industry. All Members here this afternoon can be proud of that.

I welcome the Minister to his place. I have great regard for him. He is one of the hardest-working Ministers in the Government. I am also delighted that we have a Secretary of State from good, steelmaking stock, which brings a lot to this debate. He completely understands what is at stake, given his family background. I welcome both Ministers to their new positions and look forward very much to working with them.

It would be remiss of me not to thank the previous ministerial team for its efforts. The right hon. Member for Broxtowe (Anna Soubry) and I regularly disagree on certain matters, particularly in relation to the European Union, but I have enormous respect and admiration for her work and her engagement with Members who have steel-related industries in their constituencies. She went around the country visiting our steelworks and talking to employees, unions and site managers about the steps that needed to be taken. She should be given a lot of credit for that.

I pay tribute to the Community union and Roy Rickhuss, whom I enjoy working with. He is a real advocate for our steel industry. Roy’s representatives on the ground do much to ensure that the views of steelworkers throughout our steel sites are heard as part of these debates. Great credit should be paid to him.

I am proud of much of what the Government have sought to do to try to help our steel industry. We have moved the debate on energy compensation along and have a package in place. We have made great strides forward on procurement, and I will come to that. Although there is more work to be done on dumping, I, for one, have appreciated Ministers’ efforts to raise directly with the Chinese the consequences of what is happening.

The big concern in Corby—I visit the steelworks regularly to talk to the site management, unions and employees—is that there seems to be a bit of a vacuum. Not much information is coming from Tata on where we are, and this is at a time when we have had some positive announcements about other sites, such as Scunthorpe, where the workforce now have real certainty about the future. We need further certainty about Tata’s existing portfolio. I know that discussions are ongoing with ThyssenKrupp, but I urge that the message from this Chamber this afternoon is that Tata should say publicly as much as it can about the current state of play, which hangs like a cloud over our steel towns that are Tata sites. We must try to put an end to that uncertainty as quickly as possible and to do the right thing for our steelworkers.

There are three areas where Government leadership will be key in the coming weeks, months and years. The first is EU exit. I campaigned to leave the European Union and I am pleased that the British people’s verdict was that we should leave, but I accept that other people have sincerely held views to the contrary. Exit offers a real opportunity to our steel sector, but engagement will be crucial to getting it right, and we must thoroughly engage with the unions, the companies and the workforce to get the policy absolutely right. We need to understand the requirements, needs and aspirations of our steel sector for the years ahead.

I believe that when we leave the European Union we will have more tools at our disposal, but it is important to get that right. The Government will be able to act directly on dumping and state aid rules; they have had to go through Brussels in the past. We all agonised over the difficult few months when Ministers were going to Brussels and making the case for the energy compensation package, only to see the can kicked down the road. We eventually got to the right place, but it is welcome that in future the British Government will be able to put those things in play.

[Stephen Kinnock (Aberavon) (Lab)]

The hon. Gentleman is making a very insightful speech, but the fact is that the way in which state aid and the European Commission work is that national Governments must provide the Commission with a list of their priority cases. It is a matter of record, however, that this Government consistently failed to put the energy-intensive industries package at the top of that list. The Commission was dealing with cases as they came from our Government, so it was the failure of our Government to make that a priority. Only thanks to the pressure that we put on them did they suddenly put the energy-intensive industries compensation package to the top of the list, and the case was then resolved within three months.

[Tom Pursglove]

My understanding was that British Ministers were going over to Brussels regularly to make the argument for the energy compensation package. I remember having numerous conversations with Government colleagues about the importance of that, and they were certainly relaying the significance and severity of the delay and its impact on the industry. Again, I commend them for those efforts.

Another point is that outside the European Union the British Government would be in a position, if they wanted to, to emulate the sorts of tariffs that we have seen in the United States. We would be able to do that if we felt that it was in our national interest. Whereas before we would have had to try to enact it through Brussels, we would be able to do it directly. I think that we should look at all these things.

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[Angela Smith]

I completely agree with my hon. Friend. His point relates entirely to the situation with shale gas. My hon. Friend made an impassioned case for the shale gas industry earlier this afternoon, and I entirely support him in that. I support the signing of the memorandum of understanding by Community and by the GMB. We all know that the domestic supply of shale gas will help not only the steel industry, but a range of industries in the UK, because it will provide valuable feedstock for the chemicals industry, for example.

Are the Government continuing to support the development of the relevant steelmaking capacity to ensure, for instance, that UK steel will be used in developing the new industry? There have been difficulties in ensuring that the UK steel market can provide that capacity, but we know that work is ongoing, in partnership with the oil and gas industry, to get over those obstacles and make it possible for the UK steelmaking capacity to deliver the steel that the shale gas industry needs. That relates entirely to the point my hon. Friend made: will we ensure this time that we do not miss an opportunity to expand the UK steel industry and exploit new opportunities that become available, such as shale gas?

The same can be said of the Swansea bay tidal lagoon. Is the Minister providing input on the process to the so-called Hendry review? That is critically important. There are huge advantages for the UK steel industry from that project, if it goes ahead.

[Stephen Kinnock (Aberavon) (Lab)]

My hon. Friend is giving a passionate speech, as always. It is also important to note that the Swansea bay tidal lagoon is just the first in a number of projects. The economies of scale coming out of that could deliver lagoons in various places around the country—far larger, in fact, than at Swansea bay—so the potential for steel and steelmaking from lagoon projects is enormous.

[Angela Smith]

I completely agree. Potentially, this is an exciting new industry for the UK that would provide reliable baseload energy to meet the nation’s needs. The steel necessary for building those tidal energy projects will come not just from south Wales, but from Firth Rixson and Forgemasters in Sheffield. It will involve some of the best and most technologically sophisticated steelmaking available in the UK. Is the Minister absolutely committed to ensuring that the voice of the steel industry is heard at the heart of Government in looking at whether we give the project the go-ahead? Can we look forward to hearing something specific about that in the autumn statement?

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[Stephen Kinnock (Aberavon) (Lab)]

Diolch yn fawr, Mr Davies. It is a pleasure to serve under your chairmanship. I thank my hon. Friends the Members for Redcar (Anna Turley) and for Middlesbrough South and East Cleveland (Tom Blenkinsop) for securing this debate, and for their contributions. I welcome the Minister and shadow Minister to their places.

A year on from the closure of Redcar, our steel industry is still in crisis. Make no mistake: we are still staring into the abyss. My constituency is built around the town of Port Talbot, which is living under a cloud. We are a steel town. The steelworks is the blazing heart of our economy, our community and our lives, and we do not know whether it has a long-term future. Our steel industry and the communities built around it face a perfect storm: a long-term declining British manufacturing base; an economy facing fundamental challenges, particularly in light of the referendum; and a Government who are quick with excuses but glacial when it comes to solutions or strategy.

That perfect storm comes together to create an uncertainty with a real, lived effect. It is not only hitting the order book—running down the short-term prospects of our industry, without which there can be no long term—but affecting people’s lives. I have constituents who cannot get mortgages or loans, because there is no guarantee that they will have a job in six months; constituents who do not know whether they will be able to help their kids through university or college; constituents who, simply put, do not know whether they and our town of Port Talbot have a future.

That existential uncertainty has been dragging on for a year. Just three months after Redcar closed, we learned of 1,000 steel job losses across Wales, 750 of them in Port Talbot. The men and women of Port Talbot, Llanwern and the rest of Tata in Wales were left in limbo for more than two months, unsure whether theirs would be the jobs that went. Then, about a month later, came the potentially devastating news that Tata wanted to sell. From a fire sale we got the slow burn, which somehow morphed into the joint venture in July. Today we are no clearer.

We are told that the joint venture is still the option, but what that means is not clear. What does it mean for primary steelmaking, investment and jobs? Is Tata’s British arm even part of the joint venture plans? Apparently not, unless there is a resolution on pensions. But any further delay has a real impact, because there are very practical decisions that have to be made now if the industry is to continue, such as relining the second blast furnace at Port Talbot, without which there is no sustainable future for primary steelmaking in this country.

The Government, along with both companies, must set out clearly what the joint venture really means and must give us the cast-iron guarantees that Roy Rickhuss of the union Community called for just this week on jobs, investment and the long-term future of Port Talbot and the rest of the business. Although we do not know the reality, our fear is that this joint venture is little more than a smokescreen for cutting Tata Steel UK loose to consolidate the business on the continent. ThyssenKrupp has never shown much real or active interest in Tata’s UK operations; we know that the joint venture is right at the bottom of its priority list, beneath its internal restructuring, domestic jobs guarantee and ongoing negotiations with the German union IG Metall. When that is added to Tata’s complex internal dynamics, which we saw in the changes in Mumbai, the result is a sword of Damocles, forged by an inept Government with dumped Chinese steel, hanging over the heads of people in Port Talbot.

[Mr Clive Betts in the Chair]

The situation is even more precarious given the vote to leave the European Union. Brexit poses real challenges for our industry. More than half of our exports go to the continent, so it is essential that the Government act to protect the steel industry throughout the Brexit process and negotiations. First, they must ensure continued access to the single market and continued membership of the customs union. Those matter because they will allow us to avoid tariffs that would devastate the industry and because they strengthen our hand in fighting Chinese dumping. The Minister should confirm today that his Government will strain every sinew to ensure unfettered tariff-free single market access for British steel and the tariff protections that come from standing with a market of half a billion consumers. Secondly, they must act to protect the steel supply chain. Around half the steel used by UK carmakers comes from Tata and Port Talbot; the automotive and steel industries are inextricably bound together, and each needs the other to stay in the UK in order to be successful. Last week’s news about Nissan was welcome, but the Government must commit to offering the same terms to other automotive producers such as GM, Toyota, Ford and JLR to ensure that they remain in Britain.

Those are just two of the actions that the Government must take to ensure the future of the steel industry. However, it is the Government themselves who are the greatest cause of uncertainty for our communities. For years, we have seen an approach characterised by indifference and incompetence, and now we can throw in complacency. The Government act as if the weakness of the pound is a knight in shining armour, riding to the rescue of the steel industry, but it is really a Trojan horse attacking our industry from within. In the short term, the 15% drop in the value of the pound has helped UK steel exports, but come the new year the penny will soon drop. The cost of the raw materials that we have to import—coke, coal, iron ore—and of energy will shoot up. Those costs will have a huge impact on the bottom line, as they already do for those who process scrap, who buy month to month or week to week. As Bimlendra Jha put it two weeks ago,

“you can’t make a business profitable on currency, we have to make it profitable on a structural basis.”

The reality is that the industry does not see the structural problems being fixed, because we have a Government who can talk a good game but who are sitting on their hands. It is straightforward to change that, but the Government must take concrete action in a number of areas. First, will they guarantee that the co-investment and soft loans offered last April still stand? Secondly, 12 months on from Redcar, will they finally make progress on the five asks? Thirdly, will they protect the steel industry from further Chinese dumping by voting against market economy status for China? This month, the European Commission will decide its position on this question, ahead of the December vote at the World Trade Organisation. Let us be clear: a China with market economy status is a China that can and will keep dumping with impunity. Will the Minister let us know how the UK Commissioner will be mandated on MES? Will the Commissioner vote in accordance with the European Parliament and the clear will of this House?

The autumn statement gives the Government other opportunities to give steel a fighting chance by removing plant and machinery from the calculation of business rates in a way that also compensates local authorities and, crucially, by acting on energy prices. I have no doubt that the Minister will point to the compensation package and talk about energy efficiency. That is fine, but it should be the icing on the cake. We need the actual cake first. Our prices are £17 per megawatt-hour higher than Germany’s. That is 40% to 45% more expensive, and it is killing the competitiveness of our industry. We cannot save 45% through energy efficiency alone.

The Government are motivated by tactics, not strategy. They are more interested in producing a political fig leaf to keep us quiet than in solving the problem—but we will not be silent, the industry and the workforce will not be silent and our communities will not be silent. We know that our futures depend on solving this problem and we know that the Government can and must do better.

To quote Bimlendra Jha again,

“while there has been a turnaround…we are still not out of the woods.”

Mr Jha also said that

“whether you drown one foot under the water or 10 foot, you still drown.”

That is why we need a proper industrial strategy for the steel industry. The Government’s future capabilities assessment is a welcome baby step towards that, but it is no industrial strategy. However, the Government will have some help from us with that, because next month the all-party group on steel and metal related industries will produce our industrial strategy document. Our document will show how an active and engaged Government, motivated by strategic and economic rather than tactical and political thinking, can build the environment for our industry to thrive, creating a level playing field on cost and trade, connecting up supply and demand, building enforceable procurement rules and forging a new model of partnership for growth and progress.

Just as iron needs oxygen in order to be transformed into steel, our industry needs a strategic and engaged state, working in partnership with the industry, unions and workforce. The future of steelmaking in the United Kingdom is hanging in the balance. The future of the thousands of steel workers and their families and communities in Aberavon and throughout the country is hanging by a thread. We can overcome the uncertainty and build a bright and secure future, but only if we act—and we must act now.

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[Christina Rees (Neath) (Lab/Co-op)]

I congratulate my hon. Friend the Member for Middlesbrough South and East Cleveland (Tom Blenkinsop) and my hon. Friend the Member for Redcar (Anna Turley) on obtaining the debate. I welcome the Minister to his place, and want to compliment my hon. Friend the Member for Aberavon (Stephen Kinnock) on his great speech. His constituency is adjacent to mine, and I assure the House that he and I are working together for the people who live in our constituencies and work at Tata Steel.

To say it has been a difficult year for the steelworkers of Neath and Port Talbot would be an understatement. The challenge of competing in a global market, the absence of anti-dumping tariffs, the lifting of the lesser duty rate and Brexit all conspire to create a world of uncertainty and fear. Of the 1,050 jobs lost in the UK steel industry since the year began, 750 of them have been lost from Port Talbot. That was on top of the 400 jobs lost in 2014.

Steel and the steel industry are essential to Wales and its economy, and that is particularly the case for my constituency and the people of Neath. The notion that it does not have a future is simply unthinkable. There are 575 businesses making up the steel industry, employing 31,000 people across the UK. More than 50% of those jobs are based in Yorkshire and Humberside or in Wales. However, between 1997 and 2014, iron production in Wales fell by 3,210 kilotonnes—or by more than 50%. Steel production has fallen by 25% during the past 40 years. Nevertheless, last year was a record-breaking one for Tata Port Talbot, with the plant producing 3.2 million tonnes of steel.

Decline and uncertainty are things that our steelworkers have had to deal with for many years and, being as robust as the steel that they make, they have bounced back every time, working through it all to keep our country supplied with the finest steel in the world. However, the uncertainty has taken on a new form in the shape of Brexit. The European Union accounts for more than 40% of direct British steel sales— and more, when the exports of British manufacturers are considered. Post-Brexit tariffs on British steel or an elongated trade agreement might signal the death knell of an industry already fighting to compete on a level global playing field.

I remind Members that the forerunner of the European Union, the European Coal and Steel Community, was set up not only to cement peace but to help economic growth by pooling resources and preventing unnecessary competition. Its architects would be astonished at the current state of affairs and the UK Government’s inability to work with our European partners to prevent unnecessary competition from across the world. The latest industrial revolution taking place in China may well be the biggest of all. In 2015, the Chinese produced 804 million tonnes of steel, or 50% of the total worldwide output. The UK produced 11 million tonnes during the same year. It is a matter of not whether there will be implications for the UK steel industry as a result of Brexit but what their extent will be. If the Government do not do all they can, exports will be hit hard, output will be slashed, jobs will be lost and communities will be forsaken.

The picture painted may be bleak compared with a golden past, but I firmly believe that steel in Wales and the UK has a strong future. A future for any industry is all about adapting to change and turning threats into opportunities. The future of the steel industry is clearly about innovation, and technological innovation is in its business model. Beyond the heavy end of steel production that we all know so well, we also have organisations that innovate and produce high-tech products that are changing the way we view steel.

Neath Port Talbot is home to a company called Specific, which uses coated steel to make world-leading, innovative technologies that produce, store and release energy. At the heart of its work is Swansea University’s bay campus, which straddles the constituencies of Neath and Aberavon. Specific is hugely concerned about our leaving Europe, not only because of the essential funding it has received from the EU—without which it probably would not exist—but because of the potential loss of a market in which it could promote and sell its products. It is that sort of high-level innovation that needs to be harnessed and nurtured if we want to see a future for our steel industry.

[Stephen Kinnock]

My hon. Friend is making an excellent and comprehensive speech. It is important to underline the fact that the quality of the steel is possible only through primary steelmaking. It must be produced on the basis of a process that starts right up the chain with a blast furnace, not with an electric arc furnace. If we are going to take steel into the 21st century and as high up the value chain as we can, we must retain primary steelmaking in this country.

[Christina Rees]

I thank my hon. Friend for making that important point.

An innovative product is only one part of the story; we must also use the current crisis as an opportunity to change the way we do business so that a structure can be established to protect the steel industry for many years to come. What about a management-workforce buy-out at Tata Port Talbot, and perhaps elsewhere? It could be set up in the shape of a co-operative and take advantage of the benefits of a tripartite model of delivery that would also involve investment from the public and private sectors. There are many such examples from across Wales and the UK, including Tower Colliery, John Lewis, Welsh Water and hundreds of credit unions. Welsh Water’s slogan is “For Wales, not for profit”; we could apply the same principle to our other key industries, which for Wales means steel.

Co-operation, consensus and community are the founding principles of not only co-operatives but the Labour party. It is on those shared values that figures from across the Labour movement have led the development of organisations that have anchored communities during difficult times and helped to create a buffer against global economic shifts. Let us consider the possibility of doing the same in communities such as Neath, Port Talbot and elsewhere. I urge the Government to play their part in this endeavour.

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[Mr Hurd]

I will come on to that issue. The point I am trying to make is that the Government have not been all talk: we have taken action on energy.

I refute the allegation that the UK has been a fundamental obstacle on dumping. We have pressed for anti-dumping measures, specifically on wire rod, seamless tubes, rebar and cold rolled products. The EU now has 39 trade defence measures in place, and imports have fallen significantly as a result. We are an active member of the G20, which, as hon. Members know, set up a forum to look at the issue of dumping. The lesser duty rule is an issue; I do not know whether there is party division on that. Our position is that measures taken against dumping need to be proportionate because we have to balance the interests of consumers, the industry and businesses. We have been and will continue to be a very active voice on dumping.

My hon. Friend the Member for Corby rightly talked about procurement. Again, the UK has been the leader in the EU on responding to the new flexibilities, and new guidelines are in place. The feedback from the chief executives at the meeting last week was that they did not really want to talk about procurement because they recognised that action had been taken and other issues were more important to them, not least business rates, which I acknowledge continue to be an issue. The Government have reformed business rates in a way that is designed to present a net benefit to the UK economy. Steel companies will benefit from that reform. Does it go as far as the steel industry wants? No. Are there big complexities, not least around the affordability and doability of what the steel industry wants? Yes, but we will continue to try to work through them.

On the strategic direction, the Government have stepped up and offered to fund the capability study and work with the sector to identify the capabilities that are needed—that was the point made by the hon. Member for Penistone and Stocksbridge (Angela Smith)—and growth opportunities for the future. There has been action, but we are clear that our work is not done. There is no room for complacency, given the pressures on this critically important industry.

We are looking at all the options for energy. They are complicated, because what we have got to do is legal and, as the hon. Member for Middlesbrough South and East Cleveland said, a consensus has to be built on who pays. If the steel industry pays less, the chances are that someone else is going to have to pay more. Our instinct is to focus on a strategic, sustainable approach; we have to move on from the sticking-plaster approach. I am glad hon. Members are nodding.

I am going to accelerate to fulfil my pledge. Of course Brexit brings tremendous uncertainties. As hon. Members know, we have not even started the negotiation process, let alone finished it, but I say to them what I said to the chief executives last week: this Department is your liaison point. It is our responsibility to listen very carefully to the sector to make sure that the issues you face are totally understood by the Government. In that respect, the steel sector is the same as the automotive sector and other sectors. Our responsibility is to listen to the sector and understand the granularity of the issues it faces so my Secretary of State, who is at the table with the decision makers in this process, is fully informed and able to represent the industry.

[Stephen Kinnock]

The Minister is making a comprehensive speech. On the topic of Brexit and inter-departmental co-operation, I draw his attention to the remarks made by the Secretary of State for International Trade. He said:

“We must turn our backs on those that tell us: ‘It’s OK, you can protect bits of your industry, bits of your economy and no one will notice.’ It is untrue…We must be unreconstructed, unapologetic free traders.”

Does the Minister think that, under his right hon. Friend’s guidance and as we leave the European Union, our ability to deploy trade defence instruments against the dumping of Chinese steel will be strengthened or weakened?

[Mr Hurd]

I am going to accelerate now. We are clearly being proactive about championing both free and fair trade, and we are very active with the EU on measures about that. As my hon. Friend the Member for Corby made clear, Brexit may in theory present us with some opportunities and freedoms that we do not have at the moment, but all that is to be decided. It all needs to be agreed as a result of very full engagement with the sector.

My final point is about industrial strategy, which is where everything comes together. I will simply say what we said to the industry leaders: we want to work together to move the story of the sector away from any suggestion of sunset, failure or survival to talk of exciting growth. We need to work together on that to understand where the opportunities for growth are, where the capabilities are and where Government can provide support by ensuring that Brexit is right, by levelling the playing field and by helping with the innovation that is critical. We are absolutely serious in that determination. With that, I leave the Floor open to the sponsors of the debate.