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Dr. Hywel Francis (Aberavon) (Lab): This is an opportune debate on the future of the British steel industry, which I welcome as a member of the steel union community, a former chair of the all-party group on steel and as the Member of Parliament for the steel constituency of Aberavon. I say that it is opportune for obvious reasons. We are moving into a new period with the imminent takeover by Tata of Corus. In listening to the speech by the hon. Member for Blaenau Gwent (Mr. Davies), I am reminded of the words of the Italian socialist Antonio Gramsci:
Pessimism of the intellect, optimism of the will.
While the hon. Gentlemans speech had that sense of pessimism or, I should be generous, realism, I would like to strike a more optimistic noteoptimism of the will. Potentially, we are in a situation where there is a great opportunity. That is certainly the view of management and unions in the Port Talbot steel plant in my constituency. I commend in particular the work of Mr. Phil Dryden of the management of Corus and Mr. David Ferris, the chair of the joint unions, who personify the joint working in the way in which they are building a new future for that plant. That joint-working is known as the journey.
I should also point to the words of the Secretary of State for Wales, my right hon. Friend the Member for Neath (Mr. Hain). He recognises, as I do, that the takeover has enormous potential, and he emphasises, as I do, that the steel industry has been, and still is, strategically important to both the Welsh economy and the British economy.
Dr. Kumar: My hon. Friend thanks many people for the contribution that they have made to the steel industry in his area. We should also congratulate Philippe Varin on doing a marvellous job in turning around Corus from the situation it was in three or four years ago. It is because of his leadership of Corus that Tata Steel from India is in a position to buy the Corus steel industry. Credit is due to Philippe Varins leadership, and to the entire board.
The key is investment. The signs are relatively positivein contrast to some of the comments of the hon. Member for Blaenau Gwent. I welcome the good work done in the run-up to the takeover by the Corus management in securing a good deal for its employees for the immediate future, including resolving the employee pension fund issue and trade union representation and consultation arrangements, andequally importantlyin securing the confirmation of previously agreed capital expenditure projects. That shows that, importantly, there is recognition of the position of the steel industry in Britain. Tata appears to have a strong commitment to the UK steel industry; otherwise, why make those commitments?
That leads us to believe that the other key factor is the positive role of our Government in the changeover period. The industry is rightly praised for the success in terms of productivity improvements year on year
they are much better than for any other part of the British economy. Both the management and the unions should be proud of that, and I am sure that the Government recognise that.
I was very pleased by the constructive statement made to the Welsh Affairs Committee by the Minister for Trade, my right hon. Friend the Member for Makerfield (Mr. McCartney) on 6 February. During one of the sittings of our major inquiry into globalisation he said:
The DTI are very keen indeed to work with this new inward investor...we have to ensure that Tata...are looking to expand into markets with the materials and products that are developed by Corus.
I was pleased to see that Tata have confirmed their commitment in terms of their previous issue of capital investments and I am pleased to see that they have come to a deal with the trustees of the pension fund to sustain and invest in the pension fund. That seems to give me an impression that they are here for the long haul.
Tata has given a commitment in terms of the location of the business here in the UK and so we will be looking to work with the company very proactively, and if there are issues that come up where we can assist we will do so.
That is a welcome commitment on the part of the Government. I take from that ministerial statement that this Labour Government recognise that steel is of strategic importance to the British economy and that they are prepared to enhance that. I look forward to hearing the Ministers response to that point.
Finally, may I be a little parochial? Will the Minister urge the Government to encourage discussions with Tata to ensure that there is long-term steel investment in Port Talbot in my constituency, and also in all other plants right across the United Kingdom? My plant needs a modest investment of £240 million in the finishing end to ensure that the necessary efficiency and the maximum output of 5 million tonnes can be achieved. Incidentally, that £240 million is roughly the same amount as the banking costs of achieving the recent takeover.
I am sure that the response of the skilled, professional and dedicated steel industry work force throughout the UK will be worthy of that great industry. We are very proud of them, and we believe that the industry has a great future.
Mr. Elliot Morley (Scunthorpe) (Lab): I congratulate the hon. Member for Blaenau Gwent (Mr. Davies) on obtaining the debate. He made good points reflecting some of the concerns that steelworkers feel, and he repeated points that they raise with me as MP for Scunthorpe and with Members representing similar areas. I am sure that the hon. Gentleman accepts that, like his own area, Scunthorpe is a community built on steel; few communities have been so dependent on an industry. That is why I, as MP for Scunthorpe, and my hon. Friend the Member for Brigg and Goole (Mr. Cawsey), where many steelworkers also live, are very concerned about the changes. We want there to be a long-term future for our communities and for steelmaking in this country.
It is a matter of regret that when the steel industry in this country was at its height, the managements of steelworks did not have the strategic vision to reach out to developing countries and to make strategic partnerships. Such partnerships might have been established on a different basis if they had been agreed some years ago. That was a missed opportunity. I know that the Corus management sought a partnership with a Brazilian company. That reflects the fact that there is a strategic argument for this kind of link-up. I do not think that anyone would deny that fact in respect of the Arcelor-Mittal link-up, or that we are in a global economy and we have to compete globally. There is a logic to this kind of development. That is why there were talks with Tata and other companies.
By coincidence, I was invited by the British Council to speak in Jamshedpur where Tatas headquarters are, at an environmental event. As it happens, that was also part-sponsored by the Association of British Scholars. They are all prominent Indian academics and business people who have been educated in the UK. Many Tata executives fall into that category, including Dr. Mukherjee, who is the managing director of the steelworks in Jamshedpur. He was one of the organisers of the conference. I had an opportunity to meet Dr. Mukherjee, and Mr. Muthuraman, who is the chief executive of the group, and to see their operations in Jamshedpur and to talk to a lot of people involved in it.
Tata has a good record in India. It has a good social record and is a well managed company with global ambitions. I take on board the point that has been made by hon. Friends that Tata would not have spent all the money that it has spent on buying a steel company in order to close it down. The company bought it because it is seeking a strategic partnership. There is logic in that argument. In fact, my hon. Friends might be interested to learn that the founder of Tatait was founded at the beginning of the centuryinvited Beatrice and Sidney Webb to Jamshedpur to advise the company on its social and economic policies. The Webbs advised Tata to introduce an eight-hour day in 1912, and it introduced that in 1912: a long time before its interest in Corus. I talked about jobs to Mr. Muthuraman, and about investment and the pension. Tata has certainly delivered on the pension, in terms of making up the shortfall and raising the company contributions. That offers great reassurance to many of my constituents, and to people in the whole of the region.
I felt that Tata was serious about things; it made it clear that it was not buying into Corus to reduce jobs and sack lots of people. Of course, it is a global company, and I have to say that one will not hear many reassurances from Coruss management about the long-term future of jobs. Scunthorpe has been through a lot of very painful restructuring, involving the loss of many thousands of jobs. That happened under the present management.
I take the point that was made about energy. Deregulation in this country gave us the lowest energy costs in Europe and Corus has of course benefited from that. There have been changes following the rise in energy prices, and I agree with my hon. Friend the Member for Aberavon (Dr. Francis) that there has been a delay in deregulating the European markets.
Deregulation is coming, and it will certainly be to the benefit of this countrys industry. I also understand the point that was made about carbon. As a former Minister with responsibility for carbon trading, I pressurised Commissioner Dimas to take a tough line on other countries, particularly in the second round of the national allocation plan and the European emissions trading scheme. I am glad to say that he took that tough line, and he has shown real leadership in rejecting plans from a number of other countries, including Germany and France, and saying that they had to make sharper cuts in emissions. Of course, that levels the playing field for us.
Nia Griffith: On the emissions trading scheme and new investment, does my right hon. Friend agree that we need to study the issues in detail in order to provide a proper level playing field for new investment in our steel industry?
Mr. Morley: There are always such issues, and I understand the point that my hon. Friend makes. I must echo the point that was made about Philippe Varin; he has indeed been a very good leader of the company. I recently met Andrew Page, managing director of Corus, to talk about the various issues. Coruss management have led the company into profitability. They were tough negotiators regarding the carbon allocation; indeed, their carbon allocation is quite generous. I appreciate that new entrants constitute a different issue and all I can say is that I am more than ready to work with the unions and the companies to make sure that they get a fair deal and that they are not disadvantaged compared with European rivals. That is very important.
I agree with the hon. Member for Blaenau Gwent that the test of commitment is investment and it is investment that we want to see. It does nobody any good to talk about massive job losses or the end of steel making in this country; I do not believe that that will happen. My local paper, the Scunthorpe Telegraph, carried out a survey on this issue, stopping people in the street and asking them what they thought about the Tata takeover. The vast majority of people said, I think that we should give the company a chance. Let them demonstrate what they want to do. We should judge them on their actions. That is not an unreasonable position to take, and I am sure that that is by far the overwhelming view of the unions and of the people of Scunthorpe. One person did tell the paper that there would be thousands of job losses. I did notice, however, that he refused to give his name, so I doubt whether we can take what he said seriously. Nor do such comments help the steel industry in Scunthorpe and the rest of the country.
Investment is the test. We want investment in our steel works, because we have to compete on the global stage. We now have links to the Asian market, which is to the advantage of steel making in this country. A lot of added-value steel is made in this country that is not made by the Tata group, which is also an advantage. Tata can bring expertise, skills and enthusiasm that can benefit steel making in the UK. Let us judge Tata by what it does. That strategic link can bring benefits, but
we do, as I said, want to see investment. Manufacturing is the bedrock of our economy and our productivity, and I agree with the Chancellor that we should move toward a high-tech, high-skill manufacturing economy. I believe that the Tata group shares that vision, and that we in this country have a good steel industry; we certainly have a good steel works in Scunthorpe. I want the industry to succeed and prosper, and I see no reason why the Tata group does not share those objectives.
Dr. Ashok Kumar (Middlesbrough, South and East Cleveland) (Lab): I congratulate the hon. Member for Blaenau Gwent (Mr. Davies) on securing this debate. I had not realised that because of the time at which the debate started, we would be able to say more than just a few words. I agree with a lot of what my right hon. Friend the Member for Scunthorpe (Mr. Morley) has said. I concur with the fair-minded spirit of his comments about giving Tata a chance to demonstrate what it is capable of. I should also point out that I worked for Corus for 15 years and am one of its shareholders. Shares were given to us when the steel industry was privatised, and I want to put that on the record before someone says that we have not declared that fact, and we have to come before another body to offer an explanation.
I want to emphasise the opportunity that exists for the steel industry, and to destroy one myth before it takes off. There is no evidence that I am aware of that Tata Steel has in any way been involved in asset stripping. Peddling such a myth would be a wrong and destructive approach, given that some £6 billion is being invested in an effort to save the pension fund and to ensure that we have a steel industry. We are talking about the fifth biggest steel industry in the world, so this is indeed a great opportunity and a great merger, and it should be seen in that light.
My own Teesside area will benefit greatly from this merger, which will ensure a secure future for some 3,000 direct workers and between 20,000 and 30,000 indirect workers. So it is very important that we welcome the new takeover and those who are trying to ensure that we have a strong steel industry. In doing so, we must praise Philippe Varin. His leadership and that of the main board, under its chairman, Jim Leng, ensured that the steel industry was in a position to be purchased by Tata Steel. A few years ago, the steel industry was heading for bankruptcy. If I remember rightly, the shares, now worth £2.60 or more, fell to 4p; they were certainly heading in a downward direction. So we must praise Philippe Varin for all that he has done.
As I said, this is a great opportunity. My right hon. Friend the Member for Scunthorpe mentioned the members of Tata Steels board, and he was right to do so. Some of them were undergraduates and postgraduates studying metallurgy and chemical engineering at Sheffield university. People I know who have talked to them tell me that they have great affection for this country. They have benefited from being educated here, which demonstrates how important the returns from higher education can be for this country. From what I have heard, they will ensure that we have a viable steel industry that can go from strength to strength.
Investment has already been mentioned, and we do indeed want to see investment, particularly in research and development. I worked in R and D for 15 years, so I know that it is essential to the steel industrys long-term and medium-term strategy. Here, the Government can play a very powerful role. I realise that we no longer intervene in the industry, but we can play our part. We should say, What can we do to give Tata support for R and D? Such support, which would ensure that our base here is maintained, is essential for all who work R and D.
Tata has been well respected since it was first set up in 1907. It was one of the first companies in India to provide free health care for all its work force. My right hon. Friend the Member for Scunthorpe mentioned the Webbs contribution, and I am sure that they had a hand somewhere along the line in that social provision. If one talks to the Tata work force in India, it is obvious that most of them love working for the company, which is one of the most respected companies in India. I feel strongly that this is a huge opportunity that is in the interests of our economy. It also shows a great confidence in British industry and our skilled work force, as well as in the Labour Government. Tata feels that under this Government the conditions are right to invest and ensure that the steel industry prospers in this country. Credit must go to the Government for managing a successful economy so that overseas investors have the confidence to invest.
I know that the Minister wishes to wind up now, so I shall conclude my remarks. We should have had a full debate on this important issue, not just an Adjournment debate, as I am sure that many other hon. Members would have wished to participate. Nevertheless, I am glad that we have been able to contribute to this debate and I congratulate again the hon. Member for Blaenau Gwent (Mr. Davies), although I do not share the pessimism that he articulated. I think that the steel industry has a great future.
The Parliamentary Under-Secretary of State for Trade and Industry (Jim Fitzpatrick):
I congratulate the hon. Member for Blaenau Gwent (Mr. Davies) on securing this debate on what is clearly an important issue for his constituents. It is also an important issue for my right hon. Friend the Member for Scunthorpe (Mr. Morley) and my hon. Friends the Members for Aberavon (Dr. Francis) and for Middlesbrough, South and East Cleveland (Dr. Kumar), who contributed to the debate. We have also had interventions from my hon. Friends the Members for West Bromwich, West (Mr. Bailey) and for Llanelli (Nia Griffith). I also note the attendance of my hon. Friend the Member for Ogmore (Huw Irranca-Davies), who as a Whip cannot
contribute but who has volunteered for extra duties to be able to attend this evening. I also acknowledge the clear understanding that the hon. Member for Blaenau Gwent has of the industry and his long personal and professional involvement in it, with which obviously I cannot compete.
This debate is very timely, as recent developments in the UK steel industry, particularly the battle for the ownership of Corus, have captured the imagination of just about anyone with an interest in the future of manufacturing in this country. The Tata deal is symbolic not only of the changes that are taking place in the global steel industry but of a fundamental and seismic shift in the economic world order.
Despite significant restructuring over the past 30 years, the UK steel industry remains a significant employer and an intensive research and development contributor to the UK economy, and it underpins many parts of manufacturing and many local communities. High technology industries such aerospace, automotive and construction require high value steel products. The UK steel industry employs some 50,000 people directly. It also provides employment indirectly for many more who supply goods and services to the steel sector.
The UK industry, the 17th largest in the world and fifth in Europe, produced 13.9 million tonnes of crude steel in 2006, the highest level of output for six years. Production is expected to increase by roughly a further 50 per cent. by 2010. According to the Office for National Statistics annual business inquiry, some 300 companies are engaged in the production of iron and steel. Around 50 per cent. of UK steel production is exported, with the EU as the main overseas market accounting for more than 60 per cent. of that total.
Our ability to respond positively to globalisation will affect our future economic prosperity. It is a huge challenge, but also a great opportunity. The global economy has undergone radical change over the past 50 years, but the last decade has seen the greatest economic change since the industrial revolution of the 19th century. But what took 200 years to change in the industrial revolution is taking 20 years in the global revolution. For example, Chinas share of the global economy, which was just 0.5 per cent. in 1978 and 5 per cent. in 2005, is expected to grow to around 20 per cent. by 2015. That is in the space of less than 50 years.
World steel demand has improved dramatically over the past four years, but the underlying global business environment will remain fiercely competitive for UK metal producers. Increased energy and raw materials prices have added to the pressures, which are set to intensify as rapidly expanding, low cost countries such as China, Russia, India and Brazil look set to increase their exports of steel products to Europe, including the UK.
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