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Westminster Hall

Wednesday 28 March 2001

[Sir Alan Haselhurst in the Chair]

Steel Industry

Motion made, and Question proposed, That the sitting be now adjourned.--[Mrs. McGuire.]

9.30 am

Mr. Paul Flynn (Newport, West): Thank you, and good morning. It is fortuitous that we are meeting this morning to discuss the steel industry. I shall not give the speech that I had in mind last week, given the serious change of attitude by Corus and the dialogue between Corus and the unions, the Government and politicians in the past 24 hours. To put it mildly, the atmosphere during that dialogue was poisonous. Yesterday, a package was put to Corus and discussion took place about which we can express at least a bat squeak of hope.

The last thing we should do is to raise false hopes among those who work in the steel industry, who are anxious about the future. That would be unreasonable. We should be making a case for manufacturing industry and for steel, not talking about a crisis in the steel industry. Steel is a vital part of Welsh industry, as it represents 6 per cent. of Welsh gross domestic product. Manufacturing industry in Wales is the biggest component of Welsh GDP at 27 per cent. Steel is an industry of the future. It is constantly seen as part of the past--it is often described as a smoke-stack industry, and many other pejorative terms are used--but it is nothing of the sort. The modern steel industry is high-tech, and has received huge investment. It is a sustainable industry, with 40 per cent. of steel being recycled, which is good for the environment as it reduces the energy take enormously.

If my hon. Friends will forgive me, I shall concentrate on the Welsh steel industry and what I know of it in my constituency. I am delighted to be joined by my right hon. Friend the Member for Newport, East (Mr. Howarth) in whose constituency the Llanwern steelworks is situated. Unfortunately, because of his duties as a Minister and the conventions of the House, he is not able to make a speech, which we would have liked to hear, but he makes an effective contribution elsewhere in his tireless fight to save jobs at Llanwern.

Many of my constituents work at Llanwern. The Whitehead steel company in my constituency, in association with another company, has threatened the loss of 35 jobs. We all want to ensure that the case is made for the steel manufacturing industry in Wales, and that it is heard loud and clear.

Yesterday, this Room was full of people rightly seeking solutions to the nightmare crisis in agriculture. Many suggested that public funds should be made available not only to the agricultural industry but to tourism, which has never happened before. Even fly fishing was mentioned--I shall try to catch the eye of the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd)--as an activity that is in financial trouble and

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worthy of public support. We are breaking new ground in suggesting that public money should be used to support the tourism industry. I am not making a case for or against it, but it has not happened before. We had crises in the 1980s when there were bombs in London and policemen with guns at Heathrow airport. Those pictures went around the world, and the tourism industry suffered a great slump, especially in London, but no call was made then for public subsidy, public support or compensation.

The attitude towards Government intervention in such circumstances is changing. Governments have traditionally intervened to help the farming industry--public subsidies have been paid for the past 50 years. However, if we are--as we seem to be--entering a new world of compensation, and if the worst happens in the steel industry, there is a strong case for paying compensation to steelworkers. If they ultimately suffer the loss of their jobs, and if their skills are thrown away and they become useless, they should be at the head of the queue for any compensation that is on offer.

Mr. Barry Jones (Alyn and Deeside): My hon. Friend fights hard for his steelworkers, as does my right hon. Friend the Member for Newport, East (Mr. Howarth). If any steelworkers, such as those at Shotton, were to lose their jobs, they would lose a salary of around £20,000 a year, and their incomes would suddenly plummet from a fair wage to virtually nothing. The steelworkers who would lose their jobs are young, with young families and big mortgages. Does my hon. Friend agree that, in any proposed scheme, the Government should help to bridge the gap? Something must be done in that sphere.

Mr. Flynn : My right hon. Friend makes a strong point. We know that the British steelworker is in an unfair position compared with many of his counterparts on the continent. Dutch steel companies send e-mails explaining workers' likely benefits, which are up to five times greater than those that a British steelworker could expect if the worst should happen.

I take my right hon. Friend's point. I have had many conversations, phone calls and meetings with friends old and new. I started working in the Llanwern steelworks in 1963, before any steel or iron was made there. The people I was working with then were fresh-faced apprentices, but they are now candidates for early retirement. It is extraordinarily moving knowing what those people, who were friends and neighbours of mine for so long, now faced and what they have been through.

There has been an almost permanent crisis in the steel industry, because it is cyclical. About every five years there has been a threat of closure. Things go from feast to famine very rapidly. That is the nature of the industry--it has always been like that. The sacrifices made by steelworkers throughout the land have been extraordinary. Plants have been slimmed down--they have been anorexic--as staffing has been reduced. Steelworkers have increased their skills, and have been very innovative in their approach to changing methods of production.

It was a great pleasure to go back to the steelworks, which I had not visited for some years, and to see how extraordinarily efficient it is. The galvanising plant now

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has wonderful kit, and it would be impossible to find a more energy efficient or productive set-up. The industry is a marvellous success story in every possible way.

What is the position in the rest of Europe? We know that the steel industry is doing very well throughout Europe, even in the smaller European Union countries such as Austria, Luxembourg, Sweden and outside the EU in countries such as Ukraine, Argentina and Brazil. There is overcapacity throughout the world, but that does not prevent other countries in the EU from improving their productivity and their sales. The Iron and Steel Trades Confederation suggested that in 2000, for the first time ever, Spain would produce more steel than the UK. It is quite shocking, considering the embryonic state of its industry over many years, that it has now overtaken our own.

However, productivity in Britain is very high--the highest in the world at Llanwern. That is freely admitted by Corus. It is acknowledged that the British steel industry is the most efficient in the world, so why on earth is this threat being made?

This debate has been informed by two splendid Select Committee reports. The first came from the Science and Technology Committee, which reported on Corus plc research and development, and the second was the report on steel by the Select Committee on Trade and Industry, which was published earlier this month. We should pay tribute to the Select Committees for their work in compiling those reports. They are splendid examples of the work of Select Committees in probing the often self-serving claims made by the industry. They expose its weaknesses and suggest practical ways in which to strengthen the steel industry in Britain, and identify the means to restore and strengthen our manufacturing base.

It is an extraordinary statistic that the amount contributed by the steel industry to the Welsh economy is 60 times that contributed by farming. We know that farming is in crisis, with all kinds of troubles, and that other elements are involved in that statistic, but that is the raw figure. The manufacturing industry contributes 270 times the amount contributed by the agricultural industry. So wherever we are--Wales, Newport or the United Kingdom--if we want a firm economic base for our children and grandchildren, we cannot discount the enormous contribution that manufacturing industry is making and will make in the future, if we protect it.

Mr. Richard Livsey (Brecon and Radnorshire): The hon. Gentleman's analysis is correct. However, does he agree that farming and the steel industry are in the same situation because of the currency fluctuations with which we have to contend? Neither can now sell a product at a profit. Does he agree that had the Government been more fleet of foot in their attitude to the euro, we would not be having this debate, and nor would there have been a debate on farming yesterday?

Mr. Flynn : I am grateful for that intervention. All those who wear pound badges should visit steelworkers and explain to them that the choice in many industries in this country, including farming, is often "euro or your job". The main crisis that has hit the steel industry is not

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a crisis of productivity or efficiency, but of the value of the product. The effect of the weakness of the euro and the strength of the pound is that the steelworkers' product is artificially expensive when exported to Europe, while that produced in euroland is artificially cheap when sucked in here. That is the reason for the crisis.

Corus has, understandably, taken a line on this. It is an international company with roots in several countries, mainly the UK and Holland, but all its decisions are informed by the need to survive, to be prosperous and to pay handsome dividends to shareholders, and are not influenced by the national interest. We have all experienced that in the bruising meetings that we have had with the head of the steel company, who is difficult to contact and to relate to. We found those meetings--unlike the one yesterday, which I shall come to--anything but productive.

The Trade and Industry Committee urged Corus and all companies to consider the long-term damage that would result from the loss of experienced staff and their ability to carry out effective research and development. The cuts in Corus involved restructuring research and development, which meant that the research and development staff and resources that would go to the Netherlands would be disproportionate, to the great loss of this country. The Committee also made a point about the difficulties that the euro has caused.

I happened to be present when the Select Committee on Trade and Industry interviewed Sir Brian Moffat and his comrades. In its report, the Committee described in graphic detail how it saw Corus and its role, and it asked the company to reconsider its decision. Great damage is likely to occur if Corus goes ahead with its proposals. We know about the heartbreaking loss of jobs, the families involved and the damage to people who face the insult of redundancy, knowing that their skills are no longer required. Many of them will never work again due to their age. However, the damage to our economy will result in a loss of capacity. If things go ahead as planned, a blast furnace may be lying on its back come the summer. That loss of capacity is irreplaceable and cannot be rebuilt. It will do enormous damage to the future prosperity of Wales and the rest of the country. The Trade and Industry Committee laid heavy emphasis on that in its report.

Dr. Ashok Kumar (Middlesbrough, South and Cleveland, East): I shall quote from the report. On Sir Brian Moffat and Corus, the Committee concluded:

Mr. Flynn : My hon. Friend is quoting from the recommendations of the report. Some of us have been familiar with the ups and downs of the steel industry for a long time. My work in the industry began before Llanwern was open, and I can remember at least four or five crises in my 31 years in the industry. Armageddon was regularly on the horizon due to problems with

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Brazil, Asia or some other country. Nightmare scenarios always came up, but shortly afterwards we found that handsome profits had been made, like the £1 billion a year made by Corus.

The Committee also said:

Some of my hon. Friends want to speak at length, and I am aware that I am taking up time, so I shall make a final point. I am optimistic about what happened yesterday in the meetings between all the principal trade unions and Corus. A bold plan was presented, which I believe is groundbreaking, as I have never heard of one like it before. It is a £90 million plan that would involve payments to Corus. The package would pay half the wages of the steelworkers for a year. During that period, there would be an intensive training programme to allow the workers to prepare for the worst--although they would hope that it would not happen. They could at least benefit from active preparation in re-skilling and re-training for high-tech industries. That is a practical way to fill lives instead of waiting for the blow to fall.

The other part of the package is of great benefit, as it would protect the capacity. There would be no change in the configuration of Llanwern and the other sites. They would not be destroyed, so could be rebuilt. The package would involve money from the trade unions, Europe and the Government. It has been informed by a distinguished and well-connected barrister, and seems an entirely new way to build a bridge between the hell of closure and redundancy and a practical way of getting out of the present position.

Without wanting to raise false hopes, we can say that the atmosphere on both sides seems different. A working party will meet in the next few weeks and report in a month's time in an attempt to rescue jobs. Both sides are clear about the reality. There is overcapacity in the industry and losses are sadly inevitable. However, there is hope of them working together not with antagonism but in a spirit of co-operation. We can at least hope that there has been a change since the period of trench war.

The unions and the work force are grateful, even to us, the politicians--or perhaps I should say, especially to us and why not? I pay tribute to my right hon. and hon. Friends, from the Prime Minister upwards to the Back Benchers. We have all been distressed about what has been in prospect. There is now the energy that is needed to take matters forward. Gratitude is due to the Dutch trade unions that have refused to take work from Llanwern. They said that if asset stripping from Llanwern and other steel plants was under way, they would not do the work.

New international solutions must be found to meet the challenges from multinational companies. It does no good for lone trade unions to argue with companies that

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can play them off against the trade unions of other countries. Trade unions must work together internationally. It does no good for one Government to try to deal alone with such a company. Governments will have to combine in pursuit of shared interests. To do that, we need new structures.

A bold, innovative plan has been produced. It deserves to work and breaks new ground. Perhaps what has happened will not after all result in the dreaded amputation of part of a steelworks. Perhaps that approach will be replaced by delicate surgery--the rescue of the hopes and jobs of many people who have given their all to the steel industry for years, and who deserve better than redundancy and the raw deal that Corus had prepared for them.

9.52 am

Mr. Elfyn Llwyd (Meirionnydd Nant Conwy): I warmly congratulate the hon. Member for Newport, West (Mr. Flynn) on securing this important debate. All of us across the political spectrum agree that there is a crisis in the steel industry in Wales, and we support any measure that will alleviate the problem.

When Corus announced the prospective job losses in February it was a shock. After it made losses of £1 billion last year, for whatever reason, the alarm bells should have rung. Manufacturing is probably in a worse state in Wales than in other parts of the United Kingdom, as 20,000 jobs have been lost. The hon. Gentleman spoke about worldwide overcapacity, but as he pointed out the industry is cyclical. The package that was reported in the Western Mail today seems encouraging. I hope to be optimistic, but I do not want to be complacent.

Sir Brian Moffat said in evidence to the Welsh Affairs Committee that the Ebbw Vale and Llanwern workers were too productive. That is not a criticism that one hears too often from bosses. His comment fills me with dismay.

The strength of the pound has had an effect: it has had an undue impact on agriculture and manufacturing, and probably on tourism. Wales is highly dependent on exporting to the so-called euro zone. According to a report in the Financial Times a couple of weeks ago, 72 per cent. of Wales's exports go there. The figure is approximately 58 per cent. for England and about 50 per cent. for London. Wales, and particularly manufacturing in Wales, is more sensitive to the strength of the pound. The Financial Times article concluded:

Mr. Llew Smith (Blaenau Gwent): Corus cannot agree on its position and on what the effect of the euro has been, and possibly will be, on its ability to export. A couple of months ago, it was blaming the euro for all the problems of the steel industry. A little later, one of its Dutch chief executives said that the problems had nothing to do with the euro. The day before the most recent announcement, Corus again said that the problems related to the euro, but 24 hours after that announcement, the Financial Times reported that the

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problems had nothing to do with the euro. I suspect that they have little to do with the euro and much to do with asset stripping.

Mr. Llwyd : I hear what the hon. Gentleman says, and he obviously knows the story as well as anyone. I also refer to what the hon. Member for Newport, West said earlier about the chairman of Corus being a rather difficult gentleman to deal with. However, I do not want to scupper any negotiations, so I only make that point in passing. I know that the euro has been mentioned many times, and then put lower down the list of perceived problems.

There is a need for a regional economic policy--in other words, for a different view of the manufacturing industry in Wales and our over-dependence on the euro zone. I hope, as we all do, that Corus will play its part in keeping jobs, whether or not that is through the package reported today in the Western Mail. We do not know what the future holds. As has already been mentioned, the Select Committee concluded that there has not been much forward planning. That fills me with dread.

Dr. Kumar : When the redundancies were first announced, the chairman of Corus told us that he had not come to a conclusion about the figure until the night before. That shows what a shambolic approach has been taken towards the industry.

Mr. Llwyd : When he gave evidence to the Welsh Affairs Committee, the chairman did not know whether one plant to which we referred was making a profit or a loss, which did not give us the impression that he was in control.

I want to ask the Minister one specific question. I am not being defeatist, but in case it turns out that today's reports are over-optimistic and Corus goes ahead with the cuts, I refer the Minister to Council directive 98/59 EC of 28 July on collective redundancies and the way forward. Will the Government consider putting judicial and administrative procedures in place for the enforcement of that regulation, if it is necessary? I am reluctant to spring that on the Minister today, but it may be important as a back stop, and it may encourage Corus to be even more co-operative than today's newspaper article suggests.

Various steps can be taken to secure jobs. I hope that a regional policy will be developed. Some parts of the UK are doing extremely well while others are not doing at all well. It behoves the Government to be creative with their regional policies, by cutting corporation tax in some areas or by cutting employers' national insurance contributions. In a recent speech, the Secretary of State for Trade and Industry suggested that we need to take a different approach to various parts of manufacturing industry in the UK. Therefore, operating aids could legitimately be used, and I hope that they will be.

The impression that I received from Sir Brian Moffat was not helpful. Various reasons have been given--some of them conflicting--about what is going on. Some relate to the cost of labour, others, somewhat illogically, relate to over-production. However, let us not scupper any possible negotiations. When

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representatives of the unions gave evidence, they were forthright and on the ball. They had taken proper advice and the package that they presented was not fanciful. Corus now realises that they mean business; the package is surely worthy of proper and mature consideration.

We know that the Chancellor is sitting on a healthy surplus. He could, if necessary, introduce a rescue package for the area. I hope that the report will bear fruit and that something will happen. Having looked at the figures, I do not think that more than about £200 million would be necessary to ensure the future of those communities, which have been devastated by the announcements. If Ebbw Vale and Bryngwyn were closed, the land would have to be prepared and decontaminated at a cost of about £100,000 per hectare at 2001 prices. That would total about £10 million. I also urge the Government urgently to consider new technologies such as broadband communication, at a cost of about £5 million, the restoration of a passenger rail service from Blaenau Gwent to Newport and Cardiff, at a cost of about £35 million and, of course, direct compensation--I fully agree with the hon. Member for Newport, West about that. Why should not those people be properly compensated?

Even at the 11th hour, we hope that common sense will prevail? I suspect that, 12 months hence, steel will be needed, and if the plants have been decommissioned, the decision will be seen to have been shambolic and made with no view to the future or acknowledgement of what everyone knows, which is that steel is a cyclical industry.

I urge Ministers to engage with Corus in any way that they can, to assist the unions in their discussions and to prepare aid packages as necessary--including assisting the package reported today. The amount of money required is not large, and could make all the difference. I hope that, even at the 11th hour, Corus will think again about how it has acted. If not, I hope that the Government will act urgently and will properly fund any rescue package and/or retraining package as necessary. I thank the hon. Member for Newport, West for the opportunity to make those points.

10.2 am

Mr. Denis MacShane (Rotherham): I congratulate my hon. Friend the Member for Newport, West (Mr. Flynn) on obtaining this debate, and on the extraordinary persistence with which he has dealt with the problems of the steel industry on behalf not just of his constituency but of the wider steel community and the public. As always in a debate such as this, I refer to my declaration in the Register of Members' Interests.

This is also a British and a wider European and international problem. There was a whiff of Welshness, if I may say so, about the contribution of the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd). If the Welsh steel industry is to export around the world and to the rest of Britain, we must consider the matter from a United Kingdom perspective, not from the more parochial south Wales position of the Welsh nationalists, who have so little to contribute to the debate.

That also applies to the Conservative party, because the fundamental problem for steel remains the triple whammy of, first, the decline in steel consumption in the

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1990s and before, which was unmatched in any other country and was the direct responsibility of the anti-manufacturing politics of the Conservative party. That is why no steel community, no steelworker and, I suspect, not even Sir Brian Moffat, will ever contemplate voting Conservative again. [Interruption.] I do not want to go into the details of his political affiliation. Those of us who have met him hope that even a sinner at the last moment of his job may repent.

The second problem handed to the steel industry by that wretched Government concerned Europe--"euro or your job." In 1996, the pound was trading at DM2.15 and steel was making money. In May 1997, the pound had risen to DM2.70 and steel was losing money, and has been losing money on exports ever since.

The third problem was the decadent privatisation of the electricity industry, which resulted in excessively higher prices for our steel companies than those in the rest of Europe. We are the only European nation that has seen a decline in electric arc furnace steel manufacturing: all other European countries have seen an increase. That was another wicked inheritance from that wretched Tory party. I should be surprised if a Tory spokesman even dared to speak in the debate.

Dr. Kumar : Has my hon. Friend observed that the steel industry is obviously not an important issue for Conservative Back Benchers, given that so few of them are present for this debate?

Mr. MacShane : The "City Slicker" column in The Daily Telegraph today depressed me, because it said that Llanwern should be closed and asked who cares about a fading industry such as steel. Newspapers such as The Daily Telegraph, and the Conservative party, should pay the same attention to the thousands of families who are facing misery and ruin as is being paid to the farmers, who also face a terrible plight.

There is a difficult world problem. Recently, I was in America where 11 companies are either in chapter 11 or facing bankruptcy. In the past six months, 16,000 American steelworkers have lost their jobs. The response to the United Steelworkers Union--a good friend of mine--was to favour a complete import moratorium. As I said to the union in Pittsburg, that was not the right approach. We need a managed approach to the world economy in steel. Mergers in Europe will also lead to job losses. It is not wholly accurate to claim that the European picture is rosy.

What can we do? I could do a lot of name calling, but I am not in that mode today. I want to be reasonably polite about the managers of our steel industry, because we shall have to deal with them in the future. I also want to be reasonably polite about my hon. Friend the Minister who is to reply to the debate, because I hope that we shall deal with him in the future. However, Corus has taken a deplorable approach to the problem. It showed great discourtesy--I shall put it no more strongly than that. The chairman of Corus was not willing to tell the democratically elected Prime Minister of our nation which plants were to be closed and how many men would lose their jobs, even though everyone in the industry had known since the beginning of

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December, after the dismissal of the joint chief executives, that the death sentence had already been pronounced.

Mr. Llew Smith : I accept my hon. Friend's point about the lack of consultation and the fact that not even the Prime Minister was informed of plant closures. However, even worse than that was the fact that the workers were not told what was to happen, when they had devoted their lives to the industry and had built it up to be the most efficient in the world. They and their families are most important, and they should have been consulted first.

Mr. MacShane : The lack of effective partnership in the steel industry, despite the best efforts of the Iron and Steel Trades Confederation and the other steel unions, undoubtedly contributed to the problems that we are facing. I have on file letters to Sir Brian Moffat dating back six years, when I was elected to the House, pleading with him to join the steel community MPs, trade unions and others to debate the future of the industry. Steel is not like Primark or Matalan: it is not a tee-shirt factory or a virtual industry. Steel requires constant interface with the Government, whether on currency, trade, investment, public infrastructure, energy costs, anti-dumping or its relationship with Europe. Government decisions in all nations profoundly affect steel. That is why the US Treasury Secretary, Mr. Paul O'Neill, is one of the great steelmaker leaders of America.

In Sir Brian Moffat, we have an accountant who worked in the nationalised British steel industry when it was run like a municipal outfit for many years. He was lucky to keep his job when the industry was privatised. He has an accountant's mentality--when in doubt, shut it down; when there are problems, axe workers; when unions say consult, tell them to get lost; and when the City says jump, say, "How high?" Over the past four or five years, we have seen the City's blind worship of financial markets, not steel engineering. Let us have no more of those ad hominem remarks. The deplorable Corus press briefings constantly chip away at and attack the Government. That is not worthy of a great international company. Let us move forward.

As a constituency Member, I directly represent steelworkers in Rotherham who are deeply concerned. This is a British issue that affects many different parts of the United Kingdom. I welcome yesterday's agreement to establish a joint working party--we have been asking for that for months. Regrettably, the announcement comes late in the day. As Members of Parliament, we must be honest and admit that a joint working party will not alter the disastrous world problem of overcapacity that steel faces--a tonne of basic steel costs as much on the world markets as a tonne of raspberry jam. However, we should look forward and consider what can be done to save the threatened jobs. As hon. Members have said, it is important to maintain capacity, because if public investment in infrastructure comes through and companies such as Nissan and others invest in the car manufacturing sector in the United Kingdom, we will be able to supply British steel.

The Government must also lend their direct support. I have taken delegation after delegation to the Department of Trade and Industry to discuss anti-dumping and regional aid policies, and have come away

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empty-handed. I hope that the Prime Minister's new commitment will be conveyed down the Whitehall feeding chain and will persuade officials in the DTI--not my hon. Friend the Minister, who is a great spokesman for the working class and industrial manufacturing--to approach matters with new vigour and vision. Germany, France and Spain have no problem backing their steel industries in compliance with European Union rules.

We have new investment in Rotherham. Boeing is coming in next week, and I have the pleasure of accompanying the Secretary of State for Trade and Industry to open a new factory, Toyada Gosei, which is a major Japanese manufacturing investment in Rotherham. Corus is investing, along with Boeing, in a new technology centre in Rotherham.

The Government must take the issue forward. We need a new approach after the election to back a thing-making economy. Britain cannot be a nation of call centres, Starbucks cafes and financial analysts. We consume more goods than ever, and many of them contain steel. That steel can and must be made in our nation. I invite the Minister to be positive in his reply, to build on the partnership programme approach agreed yesterday, to support the steel industry and to give it a positive future.

10.13 am

Dr. Ashok Kumar (Middlesbrough, South and Cleveland, East): I congratulate my hon. Friend the Member for Newport, West (Mr. Flynn) on securing a timely debate on an important subject. I agree with other hon. Members that his contribution in fighting on behalf of steelworkers is exemplary. My hon. Friend the Member for Rotherham (Mr. MacShane) said that the debate was parochial and about only Wales, but I have heard my hon. Friend the Member for Newport, West championing steel on behalf of the whole country, not just Wales, although I would understand it if he were parochial.

As a Teesside man, our Deputy Speaker--my hon. Friend the Member for Stockton, North (Mr. Cook)--will surely concur with what I am about to say. Although you are not able to take part in the debate because of your duties, Mr. Deputy Speaker, we have shared many meetings with steel managers and directors of companies regarding the future of the steel industry.

Before I came to the House, I was a steelworker. Like my hon. Friend, I worked in research and development on Teesside, at the Teesside technology centre, which, unfortunately, will soon be closed down, thanks to the vision of Sir Brian Moffat and the board of Corus. My views are supported by friends and colleagues who work in the steel industry, for the time being, many of whom have given a lifetime of service. They have done everything that was asked of them--total quality performance, quality management and other changes to the steel industry.

Managers and middle managers, who were asked to introduce changes in the 1980s, now find that they will be made redundant. I see them on Teesside, I meet them in shopping centres, and they come to see me at my surgery. My comments are echoed in the communities that I represent, which cannot understand why Sir Brian Moffat is taking such action.

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One of the mills to be closed down on Teesside is the Coil Plate mill, which is one of the best and most advanced in the world. It is profitable and successful, but it is going to be closed. The argument advanced is that it is because of over-capacity. Beyond that, however, we do not know the reasons. I have been told that preparations are being made to close the mill in mid May. Yesterday, Corus created the impression that it is in negotiation with the DETR, its joint working task force and the Iron and Steel Trades Confederation. If so--and I believe that Sir Brian Moffat and the board are honourable--why are they preparing for closures? The secret is leaked out in today's edition of The Guardian. A spokesperson for Corus is quoted as saying:

Mr. Flynn : Corus always said that there was no alternative and no way to help the steel industry that would abide by European Union competition rules. The unions, the Government and others have put together a package, which, we are advised, is practical and would abide by the competition rules. That is the great change. Corus always said that that was not possible. It did not test whether it was possible, and it had to agree yesterday that the proposals could be achieved.

Dr. Kumar : I thank my hon. Friend for those observations. I am happy that we are at least making some progress. I could see none before. I also agree with my hon. Friend the Member for Rotherham. I remain pessimistic, but I hope that I am wrong. I can only become more optimistic as time goes on. I know the approach of Sir Brian Moffat and Corus. I know from the time when he was British Steel chairman that once he makes up his mind, there is no return. He does not make up his mind lightly. I say that in all honesty. If he were to change his mind, it would do him great credit, but I cannot see that happening. I hope that I am wrong.

I welcome the union initiative. A great deal of work has been done on the proposals. I also want to give great credit to the Secretary of State for Trade and Industry and his Department. Every time that there are difficulties in relation to steel, I and other hon. Members representing Teesside go to see him. Last year, he set up a task force, which is a great credit to him. I know that the Minister recognises the contribution of the Teesside steel industry.

We should examine the steel industry in general, but we should give particular attention to its research and development aspects. A recent report by the Select Committee on Science and Technology, of which I am a member, expressed concern about the imbalance of redundancies between the United Kingdom and the Netherlands, and about the apparent downgrading of Corus's commitment to research and development in our country.

The Government believe in research and development, and in innovation, but closure of the laboratory will leave a huge vacuum in research and

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development on Teesside. The Minister supports the chemical industry's efforts to create clusters of employment, but the area that I represent faces huge job losses. Young people are being encouraged to study science and to pursue careers as physicists and chemists, so that they can contribute to research and development, yet one of the biggest employers in my area is closing one of its research institutions. That sends the wrong signal to the youngsters who will become graduates and go on to make a great contribution to research and development.

I am passionate about this matter, and I want the Minister's full support. There will be 1,000 redundancies, but that will cause 6,000 to 7,000 job losses in my community and others. Unemployment is falling in our constituencies, but it is rising in some parts of them. That trend must be reversed. Representations should be made to Sir Brian Moffat to impress on him the concerns that I have expressed, and to remind him of his responsibilities and obligations to the communities that have given his company such great service.

10.21 am

Mr. Llew Smith (Blaenau Gwent): My hon. Friend the Member for Rotherham (Mr. MacShane) has shown that he is an authority not only on the steel industry, but on matters as diverse as raspberry jam and toffee. It is difficult to follow such speakers. However, although my contribution will be modest and brief, the points raised will be important, because the Ebbw Vale plant is in my constituency, and it faces closure unless it receives a last-minute reprieve.

I have occasionally disagreed with the Government, and voted against them. However, it would be wrong to criticise them now, and it would do a disservice to the work force. I have consistently criticised Corus's actions and decisions. In the past few months, the company has not acknowledged that the Government might have a role--except, perhaps, in clearing up the mess, in terms of the environment and job losses, after it leaves town. I am critical of the previous Government, who privatised the steel industry. Subsequent events have informed us about the negative effects of privatisation.

I agree with my hon. Friend the Member for Middlesbrough, South and Cleveland, East (Dr. Kumar) that there was a lack of consultation. It is bad management not to involve the work force. The people in my constituency who are employed in the steel industry have devoted their lives to their work. They know the industry inside out. They might not have long lists of letters after their names, but they are the true experts, and they should have been involved in the consultation process. If those experts are ignored and treated with disdain, the wrong decisions are often made. I hope that the plan to set up a joint working party is not window dressing, but a serious attempt to involve the experts who have devoted their lives to the steel industry. If that is done, the industry will be far better off. If those experts had been involved in years gone by, they would not have been involved in the asset stripping that has taken place.

As I have said before, on the day that Corus was formed, it handed over approximately £700 million to the shareholders. It appropriated £900 million from the

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workers' pension fund. It wasted £135 million buying up companies abroad. It spent millions compensating former chief executives whom it obviously regarded as incompetent, and it handed out massive pay increases to the former Dutch management. All that money amounts almost exactly to the debt that Corus seems to be facing--in the region of £1.75 billion. If the asset stripping had not taken place and the money had instead been invested in the industry, Corus would not face the sort of debts that it now faces.

On the Ebbw Vale plant, no matter what happens with the joint working party, we shall still have to deal with 300 redundancies resulting from a previous decision. The work force have formulated their plans, and within the restrictions within which they have been operating, they have calculated that, following those 300 redundancies, the Ebbw Vale plant will be in profit. Under the plans that they have proposed, which I hope will be considered, the plant will be very much in profit. It is daft to consider closing a plant that is not only one of the most efficient in the world but will make substantial profits.

We welcome yesterday's decision to set up a joint working party. Much is at stake, especially for communities in Blaenau Gwent, as no other jobs are available. I am not trying to be emotional or to whip up emotion. I am describing the reality of the circumstances, as the Government's statistics show. The jobs available are for security officer on a few pounds an hour. The Government's statistics on wage rates show that Blaenau Gwent has some of the lowest wage levels not only in Wales--I accept what my hon. Friend the Member for Rotherham said about it being a UK problem--but in the UK.

I remember the day that Corus was formed. As I have said before in Parliament, at approximately 8 to 8.30 in the morning, the managing director, Mr. Tony Vickers, rang me at home and said, "Mr. Smith, there is no threat to jobs; there is no threat to the steel industry; and there is no threat to the plant in Ebbw Vale as a result of the amalgamation or the takeover." That was not true, because since Mr. Vickers made that statement and since Corus was formed, we have lost in the region of 300 jobs in Ebbw Vale. If the plans proceed, we shall lose the plant. That cannot be right. We are losing not the 700, 800 or 900 jobs that the press has suggested but in the region of 1,250 jobs, because in the past year or so jobs have been outsourced.

No one doubts the problems that farming and tourism face, and no one doubts that those industries should receive all the support possible. However, what is aggravating is that my community is in danger of being wiped out, but we are not the No. 1 item on the news night in, night out. We are not the subject of special reports. We do not receive the attention that others receive. If the plans proceed, 7,000 steelworkers will lose their jobs, and 7,000 families will lose their wage earner. They deserve as much attention and support as those who are receiving those things from the media because of their involvement in tourism and farming.

10.30 am

Mr. Richard Livsey (Brecon and Radnorshire): It is a privilege to follow the hon. Member for Blaenau Gwent (Mr. Smith). As an agriculturist, I agree entirely with his

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comments. His community will be absolutely devastated unless the closure programme can be stopped in its tracks. Ebbw Vale is on the boundary of my constituency, and my family has in the past included ironworkers in south Wales, so I know a bit about the matter. However, he is in the thick of it, and his community encounters people on the street in despair every day. We must work together to try to crack the problems. There is no doubt that there must be a crash programme in places such as Ebbw Vale, which must receive compensation and be given special status for aid. Vision is required to rescue the steel communities. If necessary, the activities of multi national companies must be forensically examined on a worldwide scale, and international agreements should be made to control the exploitation of the labour force across the world.

The hon. Member for Blaenau Gwent was right that Corus's losses of £1.75 billion and the payout of funds--from plundering the steelworkers' pension funds to pay off people such as executives--amount to almost the same. The crisis is large. I congratulate the hon. Member for Newport, West (Mr. Flynn) on securing the debate, and I hope that he was correct in his analysis that the rescue package is meaningful. As we know, the steel industry is cyclical, and 12 months is a long time in steelmaking and the steel industry. The package gives breathing space, and I am glad to see that it has been won.

I am familiar with many places in Yorkshire and Teesside, which are in just as bad a state because of the closure of parts of plants and people who have been made redundant. It is a complete and utter carve-up. It is interesting to note that although the plant at Ijmuiden in Holland is not as productive as UK plants, particularly the Welsh plants, it will remain open. Corus exports more than half its production to Europe, and owns substantial German and Dutch steel operations. Commodity steel prices are at a 20-year low.

Mr. Ken Purchase (Wolverhampton, North-East): Does the hon. Gentleman share my feeling that part of the reason why the Dutch plant remains open is that it would be difficult to close it in comparison with the ease with which British plants can be closed?

Mr. Livsey : I agree, and, if I have time, I shall address that point.

Corus, like every British quoted company is, even now, exposed to a takeover because of the organisation of our stock market and the way in which ownership responsibilities are discharged. That makes the company vulnerable, and it is trying to put a gloss on its results--or non-results as they may be at the moment--to try to make it appear more attractive. The skilled steelworkers, who have achieved record production outputs, are the victims of that. We live in a crazy world, in which less productive plants in Holland recruit more steelworkers, while more productive UK workers are being sacked. That is the law of the jungle.

British workers need help from the law. UK employment law protects British workers inadequately in comparison with continental laws. The Government

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must introduce legislation to give British workers the same protection as their European counterparts. They would not be as vulnerable if that were the case. An error of judgment was made when the Department of Trade and Industry allowed the amalgamation with British Steel, which was not done with a great deal of thought. We must reverse the anti-manufacturing policy embedded in our policy-making structure, which was left by the previous Government. We have not sufficiently put that policy aside.

Until the Government make clear the time frame for entry into the euro, the long-term stability of manufacturing that investors require will not be certain. Many aspects of the Corus cutback and the redundancies in the steel industry mean that little, if any, investment is being made and job numbers are declining. We should be asking how much money Corus will invest in the United Kingdom, in line with the rescue package. In Sir Brian Moffat's previous statements, the answer to that question was "nothing". We must extract promises from Corus.

Given the scale of redundancies, the Government should reverse their blocking of the European directive that aims to introduce information and consultation rights to most of the United Kingdom work force. Several things can be done to improve the situation in the steel industry. I agree with the hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd). We should give special status to certain areas and special regional economic assistance, as was done in the 1930s and 1940s by Governments who invested in specific parts of the United Kingdom. We might vary corporation tax and give assistance through a reduction in national insurance, or perhaps even abolish it in areas where the state of affairs is as bad as it is in Ebbw Vale. Operating aids could also be introduced, and special assisted area status for some of the crisis areas where the work force can be retrained.

Industry can be made more profitable through Government intervention. Those policies should be combined with a clear programme for when we join the euro. The hon. Member for Rotherham (Mr. MacShane) was right to say that it is a case of "the euro or your job." In many parts of the United Kingdom, that is the situation. Imaginative investment should be made into steel-using manufacturing. Why not put a state of the art car production plant alongside the steelworks? That would be easy in some parts of the United Kingdom, especially on the south Wales coast--

Mr. MacShane : And Rotherham!

Mr. Livsey : And in Rotherham--we must not forget that. It is all about competition. The steel industry is not competitive because of the euro and neither are car plants, if they are not efficient enough. Great investment must be made into manufacturing and steel-using manufacturing to stimulate demand in the industry, but that steel must be competitive on world markets or there will be imports and we will be undercut in the marketplace.

I am irritated by some of Sir Brian Moffat's statements. He is anti-competition; when asked whether he would sell his plant to the work force or to a management-work force buy-out, he said that he would

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not, because the buyers would compete against him, which would put an end to his nice cosy monopoly. That situation must be bust open--we must get it by the scruff of the neck. If Sir Brian Moffat is not committed to providing work for British steelworkers, whether on Teesside, in Yorkshire or in south Wales, he should leave it to the management and work force to show him the way to producing profitable steel that is competitive on world markets and provides work for the areas that he is trying to do down.

10.39 am

Mr. Richard Page (South-West Hertfordshire): I, too, would like to thank the hon. Member for Newport, West (Mr. Flynn) for bringing this matter before us; it should be kept constantly in the public eye. I say that because other areas of manufacturing, such as the textile industry, are steadily disappearing from the scene, but they do not appear to be areas of worry and concern for the Government. The textile industry is a prime example. Although I, too, am concerned about the loss of jobs in the steel industry, more jobs have been lost every year for the past four years in the textile industry and, sadly, I believe that the situation is getting worse. John Edmonds of the General, Municipal, Boilermakers and Allied Trades Union said that some 96,000 manufacturing jobs were lost last year, and he shares my concerns. In 2001, some 10,000 manufacturing jobs will be lost every month. That is not my view, but that of John Monks, the general secretary of the Trades Union Congress.

This is the third debate on steel that I have attended, and the first at which there has been a glimmer of hope that something might come out of this serious situation. I understand that hon. Members who are faced with disastrous job losses in their constituencies want to try to reverse the situation. I can also understand their lashing out against those whom they believe have caused the problem. However, in many cases, the target of their wrath has been misplaced and their energies misdirected. Constantly blaming Corus might be politically smart but I do not believe that the facts endorse the positions taken by many hon. Members.

In 1997, British Steel made a profit of about £1 million a day. The line on the graph then goes straight down, and Corus is now losing a fortune every day. That position is not sustainable, and it cannot be allowed to continue. Something must be done. I have enormous sympathy with steel industry workers who are caught up in a nightmare that is not of their making. I endorse what the hon. Member for Newport, West said about efficiency. It is unusual for me to quote the Secretary of State for Trade and Industry, but in his recent announcement on this sad affair, he said that the productivity of UK steel workers is now 571 tonnes a year per man--a staggering figure that makes ours one of the most efficient and productive steel operations in Europe.

I come from a manufacturing background and, for several years, I was the Member of Parliament for Workington. At that time, the blast furnace at Workington required 14 man hours for every tonne

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produced, but over the past 20 years, productivity has risen by 5 per cent. a year, which is 3 per cent. more than the figure for general manufacturing industry.

Dr. Kumar : On the criticisms of the chairman of Corus, we recognise the bitter reality that he faces, but we are greatly concerned about how he has achieved his objectives and the approach that he has adopted towards the Government, Members of Parliament and the communities affected.

Mr. Page : I accept what the hon. Gentleman says, but I understand that because the Department of Trade and Industry is one of the most leaky Departments--the Vauxhall debacle resulted from information being leaked to the press in advance of the announcement--management at Corus has held things back. However, I shall not defend or attack the Corus management because I am not fully au fait with the facts.

We have touched on only some of the problems, many of which, I believe, have been caused by the change in the balance of trade resulting from the strength of sterling. The volume of steel used in imported goods now balances that produced in and for the UK. As a result of sterling's appreciation against the euro, the average price of a tonne of steel exported to the European Union has fallen by a quarter since 1996.

I shall not follow up the rather myopic contribution of the hon. Member for Rotherham (Mr. MacShane). I suggest that he tries to cast the mote from his eye--or, perhaps, from the Government's eye--and looks to see who ticked the box to allow the formation of Corus, which has been blamed for so much of what we now face.

Mr. MacShane : Will the hon. Gentleman give way?

Mr. Page : No. I am sorry, but if I do the Minister will not have time for his thruppence-worth, and I want to hear what he has to say about the joint statement.

The hon. Member for Newport, West spoke about Europe, and said that we must look to the future. The United Kingdom and Europe must face the fact that a number of industries have such a high volume of activity that if they get into difficulties, one Government alone will not be able to prop them up and keep them going. The hon. Gentleman's little package of measures would be a drop in the ocean against the losses and costs that would face companies such as Corus. I pay tribute to the hon. Gentleman, which is unusual, but that is a debate for another day. It should take place soon.

Time is not on our side. The hon. Gentleman mentioned the developments of the past 24 hours. I, too, have received a copy of the joint statement from Corus and the trade unions. It offers a first glimmer of hope. The hon. Gentleman was right to say that we must not raise false hopes, but it is good to have something positive to look forward to. The working party's application to the EU should be submitted as soon as possible. What will the Department of Trade and Industry do to promote and support that application? The DTI does not usually push EU applications speedily. On behalf of all involved, the Minister should urge the Department to get its skates on and act quickly.

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10.46 am

The Minister for Competitiveness (Mr. Alan Johnson) : I congratulate my hon. Friend the Member for Newport, West (Mr. Flynn) on securing this debate. He said that he would make a different speech to that which he had originally envisaged, and I shall give a different reply, because of recent and important developments.

I know that you, Mr. Deputy Speaker, have a deep personal interest in the matter, and the concern felt by hon. Members across the House is shown by the attendance here, although it is felt not only by those who contributed to the debate. My right hon. Friend the Member for Newport, East (Mr. Howarth), was here earlier; he has taken pains to argue behind the scenes on behalf of his constituents at every opportunity, despite the fact that, as my hon. Friend the Member for Newport, West pointed out, his ministerial responsibilities place him in a difficult position. Also here are my right hon. Friend the Member for Alyn and Deeside (Mr. Jones) and my hon. Friends the Members for Merthyr Tydfil and Rhymney (Mr. Rowlands), for Corby (Mr. Hope) and for Wolverhampton, North-East (Mr. Purchase). They have all expressed their concern about the future of the steel industry.

This is a crucial time. As my hon. Friend the Member for Newport, West said, we must not raise false expectations; neither must we suggest that these are simple problems with simple solutions. They are complex matters, caused by difficult international trading conditions. We speak of globalisation affecting industry, but globalisation has a bigger impact on steel than on any other industry. As my hon. Friend the Member for Rotherham (Mr. MacShane) pointed out, the problems do not affect jobs only in the UK; he told us of similar problems in the United States. Overcapacity, weak prices and low profit margins have long been a problem.

The important thing about yesterday's developments is what I might call social partnership. All unions, especially the Iron and Steel Trades Confederation, which has a particular connection with the steel industry, have been extremely constructive over many years. From yesterday's developments, it seems that it has been recognised at last that talks with those who represent the work force and have expertise in the industry can produce solutions to complex problems.

Mr. Phil Hope (Corby): Does my hon. Friend recall the experience in Corby in the 1980s, when thousands of men were thrown out of work? The town had 30 per cent. unemployment, and it has taken us 20 years to recover. Yesterday's announcement shows a different way in which to operate. It gives hope to other communities under threat of experiences similar to that of Corby when the Tories dumped it in the 1980s.

Mr. Johnson : My hon. Friend makes an important point. We have been round that course a few times in debates on steel.

I have little time and want to respond to the constructive contributions made. That might mean that I miss out the contribution from the hon. Member for South-West Hertfordshire (Mr. Page). Frankly, I had heard it all before. This country had 20 wasted years in which not only were the work force attacked, but the

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only people who could stand up to defend them were excluded at every turn through spiteful pieces of anti-union legislation. If we had only created a climate of social partnership in that period, we might be much further forward with employment relations and the tackling of such issues.

Evidence of the work force's constructive approach is highlighted by the fact that productivity per employee in the industry has risen by 10 per cent. a year for the past quarter of a century. That cannot be said often enough. In 1999, the year in which the Corus merger took place, productivity was 571 tonnes per employee, higher than Germany at 543 tonnes per employee and France at 534 tonnes per employee. That is an amazing success record, and one can understand the feeling of steelworkers and their communities about last year's announcement.

I want to speak specifically about yesterday's developments, but I shall first pick up on some of the points made. The hon. Member for Meirionnydd Nant Conwy (Mr. Llwyd) mentioned operating aids, which are tightly restricted under the European Coal and Steel Community treaty. From the start of the exercise--not only from 1 February when the announcement was made, but from December when the two chief executives left Corus, which gave us an idea of what was to come--the Government and the Welsh Assembly have worked hard to find packages of assistance for the industry. That does not mean only operating aid, but whatever aid we can produce to meet the strict and rigorous terms of the treaty. No stone has been left unturned. The developments yesterday demonstrated some of our thinking on the issue.

We all hope that the initiative leads to a lack of job losses such as those announced recently. Nevertheless, we will ensure that Corus understands its obligation to clean up the sites that it might leave behind. That important environmental issue was raised by my hon. Friend the Member for Newport, West in various debates last year, and we have worked hard on it in the interim.

If my hon. Friend the Member for Rotherham did not indulge in name calling today, I would hate to hear him when he did. He rightly pointed to some of the complex international issues, and talked about the lack of effective partnership. That will be a big issue. If we can glean the support of the electorate for a second term of Labour government, I hope that we can develop the idea of social partnership. My hon. Friend has a great track record on such issues.

In another passionate speech, my hon. Friend the Member for Middlesbrough, South and Cleveland, East (Dr. Kumar) epitomised the views of people in the affected communities. He referred to research and development and the report of the Trade and Industry Committee, which we have studied closely. Our understanding of the rationale behind Corus's approach to research and development is that it wants to avoid inefficient duplication of research resources following the merger, by establishing one research and development centre in the Netherlands and one in the United Kingdom. Each operation will focus its attention on the areas where the equipment and expertise of its personnel are best placed to be effective in their research effort. We have made it clear that, wherever in this country Corus decides to site its research and development centre, the DTI is ready to

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assist: it will provide advice and will pursue policies to help the company to increase its competitiveness by maintaining a significant level of research and development effort in the United Kingdom. We shall pay close attention to the matter in the coming months.

My hon. Friend the Member for Blaenau Gwent (Mr. Smith) mentioned lack of consultation and made some fair criticisms of Corus's past approach. I want to concentrate my remarks on what a constructive approach could produce.

The hon. Member for Brecon and Radnorshire (Mr. Livsey) said that British workers want the same protection as other European workers. We have initiated a review of the entire information and consultation process in this country under various pieces of legislation, from the acquired rights directive, through the Transfer of Undertakings (Protection of Employment) Regulations 1981, to the redundancy legislation. We are conscious of the criticism that it is easier to sack British workers than any others in Europe and we do not think that that is a good thing. Perhaps the Opposition do.

We are pleased at our record levels of inward investment last year. None of our analysis suggests that that had anything to do with more lax labour laws. It was related to other issues--productivity and skills, and the fact that our economy is so marvellous at the moment. The review that my right hon. Friend the Secretary of State announced last month will be of use in this context. We want to analyse the facts and discover whether it is true that it is easier to dismiss British workers. It is not necessarily true; the issue is more complex than it appears. If we find that it is easier, we shall decide what to do about it.

We had a debate about the single currency in December. Many manufacturers told me that things would be much better if the exchange rate for the deutschmark was around 3.10. It is about that now, and Corus has made it clear that the single currency was not the sole reason for its announcements. The point about the single currency is in many ways a red herring.

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We were all pleased about developments following the meeting involving Corus and the trade unions yesterday. My right hon. Friend the Secretary of State has made it clear to the unions and to Corus that he is willing to approach the European Commission and other member states to ask for their approval for a scheme, under article 95 of the European Coal and Steel Community treaty, to assist Corus. We understand that to comply with the treaty any scheme would need to contain a significant retraining component. We believe that to be a central feature of the Union's proposals, although we have not yet seen the full details of the submission. It is an imaginative approach to providing in-work training while the work force pick up their normal wages. It would make it possible to buy some time and to improve workers' skills for their local labour market.

Officials of the Department of Trade and Industry are happy to participate and to play a key role, alongside the company and union officers, in a small working party to help to develop such a scheme. I hope that we can soon work up the outline of a scheme to enable us quickly to make an initial approach to the Commission. That approach would not, as I understand it, be affected by any purdah that might descend on us from any quarter in future. After seeking permission we would need to ask for the approval of other member states. Unanimous approval is needed. A process must be undergone, and the timetable will be tight. Corus has told us that it is willing to work with the Government and trade unions to develop a scheme, as it sees the obvious benefits to all concerned, but has asked us to seek the European Commission's consent by the end of April. That is what we shall do.

The initiative is important and we should be optimistic that a chink of light has appeared. The steel industry remains a major part of United Kingdom manufacturing industry and a significant contributor to the economy and employment. The Government will continue to work closely with all parts of the steel sector to try to ensure its long-term competitiveness.

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