Steel Industry

Tom Blenkinsop Excerpts

Wednesday 14th January 2015 Commons Chamber

[The Secretary of State for Business, Innovation and Skills (Vince Cable)]

I very much welcome the debate. It is an opportunity to show shared recognition across the House of the importance of the steel industry. In terms of basic crude steel production, we still have approximately 20,000 workers in the industry. In the steel industry more widely, we have about 300,000 workers. It is a very big and important industry, and I recognise that importance. I also recognise the anxieties that exist in the industry at the moment, notably over the future of the long products division, but also over the future of Celsa in Cardiff. We are engaging with Celsa on a regular basis, but I know the uncertainties and problems the situation presents for the work force.

The motion poses a great challenge: why are the Government not more active? I will simply speak for myself. [Interruption.] I will speak for my own personal involvement as Secretary of State before the current anxieties arose. In the course of my period in office I have been to Scunthorpe, as hon. Members would expect. I have visited Port Talbot twice. I have been to Beam Mill in Redcar on two occasions. I went to the opening of the SSI plant in Redcar, which the hon. Member for Hartlepool (Mr Wright) may recall closed under his Government, but which, with the help of my hon. Friend the Member for Redcar (Ian Swales) and others, has restarted. I have been to Celsa to discuss its very particular problems, and to a wide variety of steel-using plants involved in casting, forging, pressing and steel wire rolling, and other such installations. I have tried to engage with this industry, and understand and support it. Despite the slightly carping tone of the speech by the hon. Gentleman, I hope he recognises that there has been a great deal of engagement with the industry and some positive outcomes.

Quite apart from my own personal involvement, the Department has had three Ministers of State with responsibility for this industry, all of whom have taken a very close interest in it. The current Minister, the Minister for Business and Enterprise, would have been here, but he is at a funeral, and I personally must apologise because unfortunately I cannot be here for the winding-up speeches. However, the Minister for Culture and the Digital Economy will report back on any important issues that arise.

I will not recommend to colleagues that we vote against the motion because most of the points are perfectly reasonable—they are just telling us to do things we are already doing, and I do not object to that. It is the job of the Opposition to chase us, but on almost every item that the hon. Gentleman listed, we are taking the action he described.

Given the negative tone of the hon. Gentleman’s speech, it is worth reviewing some facts about the evolution of the steel industry. Historically, of course, it was once much bigger than it is today—it has gone through a prolonged and painful process of consolidation and contraction. However, when we entered government, crude steel production was about 9.7 million tonnes a year, whereas it is now more than 12 million tonnes and growing at about 5% to 6% a year. When I looked at the long-term time series, I was surprised to learn that the current level of production is higher than it was back in 2002 and in 1980, though the last was an exceptional year. He sought to criticise the Government, but it is worth recalling that in the Thatcher years, which are not considered to have been particularly friendly to the steel industry, steel production declined from 21 million to 18 million tonnes a year. In the rather shorter period—13 years—of the Labour Government, steel production actually halved, so the rate of contraction was substantially greater than in that difficult period of the 1980s. We could do without Labour’s sense of piousness and self-righteousness.

[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

It would be remiss if we did not mention Geoff Waterfield, the multi-union chair at Redcar steel works, who was the real hero behind the saving of that site during a campaign that lasted from 2008 to 2011. We also need to mention that on the Secretary of State’s watch, Thames Steel has closed, and Alcan aluminium smelter—not a steel manufacturer—in Northumberland has also closed, with the loss of 500 jobs. He needs to have a broader review of his record in this period.

[Vince Cable]

I pay tribute to all the members of the community who fought for the steel works and secured the reopening by my hon. Friend the Member for Redcar and others.

Of course, this is an industry with a great many problems, which I will review in a moment, and the metal sector generally has been under great pressure. I was just trying to make the simple point that the rather self-righteous tone from the Opposition is perhaps not reflected in the historical record, so I would urge a slightly more balanced approach.

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[Vince Cable]

We are not in negotiation with Mr Klesch. He has expressed an interest to Tata about acquiring the long products division. I and my officials have had a conversation with him in very broad terms. If he wants to make proposals, we will obviously look at them, then talk to him and to Tata. At that point, the issue of conditionality might well arise, but I think the hon. Gentleman is premature on this issue.

[Tom Blenkinsop]

Bringing the Secretary of State back to his comments on spasms of contractions of labour in the steel industry, he will know that between 1987 and 1992, in my locality and particularly the Teesside Cast Products site, the work force went from 25,000 to 5,000. My predecessor but one, the now Lord Langbaurgh, actually celebrated that in his maiden speech in this House when he was elected in 1992.

[Vince Cable]

I thank the hon. Gentleman for the embellishment of the detail.

I hope it is accepted that the situation with the numbers and the trends arose under both previous sets of Governments and under both nationalisation and privatisation. Let me try to get to the bottom of the underlying problems with the industry, which are serious. The first problem is structural, and has absolutely nothing to do with decisions by industry or Government; it has to do with the nature of demand.

Technology is changing. If the Eiffel tower were rebuilt now, a third of the amount of steel that was used for its original construction would be required. Construction techniques and materials have changed. Even in industries in which steel has a major market and is a major success, such as the automobile and aerospace industries, it is already being driven out at the margin by composites. Let me give a little example. In my constituency, I am trying to bring about the restoration of a pedestrian bridge over an expressway. It is a steel bridge, but if Transport for London proceeds with the project, it will be replaced by a plastic bridge at a small fraction of the cost, and composite materials will be used. Technology, about which we can do little except to encourage it in an innovative context, is a key driver in the steel industry, in respect of both production and employment.

The second problem originated with the banking and financial crisis, which resulted in a massive cut in infrastructure spending. That cut was initiated in 2009, although, admittedly, the present Government have continued restrictions on capital expenditure. The contraction of capital spending and the ending of private finance initiative projects also contributed to the drying up of a great deal of infrastructure demand.

Thirdly and crucially, the steel industry exports more than it imports. That is a rather obvious point, but the hon. Member for Hartlepool did not refer to it. He talked entirely about import competition. What he did not mention was that for Tata and the other steelmakers, export markets are critical. A key export market is the European Union, and in the European Union there is a serious problem of excess capacity. Many steel plants in France, for example, have been mothballed. Anyone who tries to compete in the European market will be operating on very fine margins, and that is a serious problem for all the producers in Europe.

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[Tom Blenkinsop (Middlesbrough South and East Cleveland) (Lab)]

We have nearly reached the fourth anniversary of possibly the greatest feat of industrial escapology, when Teesside Cast Products was purchased by SSI on 24 February 2011, after nearly three years of solid fighting by its work force. At the heart of the campaign was the Community trade union. It is my pleasure to declare my interest as a current member of Community, the chair of its parliamentary group, and a former industrial regional officer who helped to save the TCP site.

I want to echo many of the comments made by my hon. Friends about the importance of steel to our local economy. I know that Tata and Community have worked closely and constructively, particularly since the worldwide recession in 2008, to manage a series of major restructurings. Under projects such as Weathering the Storm, Fit for the Future and Project Ark, thousands of steelworkers have left the industry, but they did so with the goal of keeping our industry going in the hope of expanding again later, when the recession was overcome, and most importantly, of retaining and perhaps recruiting to the industry.

It must, however, be said that the news in late October 2014 about the proposed sale of Tata’s long products plants in the UK has cast a shadow over Teesside and east Cleveland. I share the same thoughts as my friend and the Labour candidate for Redcar, Anna Turley—she has said that she is now most concerned for the workers at long products sites across the UK—as well as those of, among many others, Robbie Middlemass at Skinningrove special profiles mill, Peter Hobson at the beam mill and, of course, Paul Warren, who works at the South Bank coke ovens and is the multi-union chair at SSI. Some of them are with us in the House today.

Before the memorandum of understanding was signed on 15 October 2014, there was no consultation with the trade unions, despite the existence of long-standing information and consultation arrangements, both domestically and within the framework of the European works council. That followed Tata reneging on a nationally settled two-year secondment deal at Grangetown labs in September 2014, which was an early warning sign of a new tone, or lack of tone, from Tata. Communications between management and the work force were negligible, and Tata had had many clandestine chats with Klesch for some time.

What Skinningrove and the Lackenby beam mill produce has more than the balance sheet appeal that Mr Klesch requires; it impacts on daily life where I live. A long drawn-out process of due diligence has again unsettled that way of life for the workers and their families. They have watched workers at the ESCO works in Guisborough lose their jobs, and have wondered what will happen to them. Whether Mr Klesch picked that up during his 20-minute visit to the Skinningrove works—he never even went near the mill floor—is, at the very least, debatable.

What beats me is the logic of Tata at the moment. It has decided to consolidate its business around its strip division, which is largely based in south Wales and Ijmuiden, with a heavy focus on supplying the automotive sector. However, even now, the long products division in the UK was significantly more profitable than the strip division in the last financial year.

Tata’s subsidiary Jaguar Land Rover plans to build its new Jaguar F-Pace sport utility vehicle at Solihull, but the fact that it is aluminium-based indicates the direction in which the industry is moving. Tragically, that will come too late for the 500 aluminium smelters at Alcan in Northumberland, who have already lost their jobs owing to inaction by this Government. Aluminium is providing a serious challenge to steel strip. The reduction in energy costs through the development of smelters in low-cost energy countries is putting a strip-only strategy in serious doubt.

What makes the UK steel industry stronger is diversity within the steel portfolio. Those in the industry remember not so long ago having to defend Stocksbridge from closure. It is now booming within its sector. A diverse steelmaking sector provides mutual security for each steel division. When one does well and another poorly, they look after each other, much like in a trade union.

Even more seriously, Klesch’s strategy of playing the raw materials market in order to make longs a success—a strategy that is based on cheap iron ore surpluses—is exactly the same strategy that other competitors will be using over the next two to three years. That strategy, despite the assurances, is not a panacea. Tata’s current diverse product mix within long products means that it is closer to the customer and can provide product-based bespoke solutions. Being a strip-only producer would make it difficult for Tata Steel to integrate into integrated construction solutions.

Inside the massive sheds at Skinningrove and Lackenby are human beings who are willing to work well for the benefit of our United Kingdom—men and women backed up by the spirit, traditions and history of Teesside, East Cleveland and our nation. The trade unions that represent those men and women have played a fighting role in preserving that heritage and protecting the jobs of their members. Those trade unionists preserved the history of an industry, an area and a nation. It was the Community union, led locally by Paul Warren and nationally by Roy Rickhuss and previously Michael Leahy, that spearheaded the fight to ensure that iron and steelmaking on Teesside did not die. It won that fight. The Government must help the workers to win the fight now.

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[Mr Vaizey]

If I am unable to answer any of the specific questions that were asked in the time allocated to me, the Minister responsible for the industry will write to each and every Member who has contributed to the debate.

The main issues that arose from the debate are the need to compensate the steel industry for the high energy costs resulting from the renewables obligation and other mechanisms designed to reduce carbon, a procurement strategy as part of a metals strategy, business rates, the future of the long products division, and CARES. As the Secretary of State explained at length, we are giving as much energy compensation as we are allowed to give under European rules. We are working as fast as we can to get state aid clearance, so that we can increase the level of compensation. We are working with industry to introduce a metals strategy. We hope that such an industry-led strategy will be produced in the next few months, to be published, provisionally, in the summer.

The future of the long products division is a very serious issue and Ministers are engaged with it. The Prime Minister and the Business Secretary met north Lincolnshire MPs, and the Secretary of State and the Minister with responsibility for such matters met Klesch. As I understand it, our officials are supporting the Syndex report, which will be published this month and will look at the rationale for sale and alternative proposals. We hope that the proposals will come forward at the end of February or the beginning of March. Those could include a commercial solution or working with organisations such as the Green Investment Bank or Infrastructure UK.

As has been well trailed, an extensive review of business rates is being undertaken, and a £1 billion package of business rate support is already in place. We do understand that the steel industry, like other large industries, is concerned that new investment in plant and equipment affects the business rate valuation, thereby increasing business rates. It wants such new investment to be excluded, and I would expect the Treasury to consider that as part of its ongoing consultation. However, Members should understand that this includes the whole business rate framework, and needs to be consulted on.

[Tom Blenkinsop]

Will the Minister give way?

[Mr Vaizey]

I will, provided that other Members understand that doing so will reduce my time to address other points of concern to the thousands of steelworkers watching this debate.

[Tom Blenkinsop]

Perhaps the Minister can give a succinct answer. Given that the Government are not opposing the motion, they must support it. The motion

“urges the Government urgently to reconsider whether mitigating measures on energy prices, planned to start in April 2016, can be brought forward”.

Could they be brought forward before or at the Budget?

[Mr Vaizey]

We are in the hands of the European Commission. There is a bottleneck on state aid and, having previously dealt with a state aid issue myself, I know that despite time being of the essence from the UK Government’s perspective, that is not always the Commission’s view. On energy prices, I remind Members that France has the benefit of extensive nuclear power, and Germany has the benefit of having grandfathered previous state aid rights into its current energy prices and state aid support.

As I have said in other debates, the important issue of rebar has been looked at in some detail and we have asked CARES to examine how it is dealing with it. It has increased sampling and checks—