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Lord Roberts of Conwy: My Lords, I thank the Minister for giving way. He has accepted that high energy costs are a factor in the competitiveness or otherwise of British steel. Will the Minister agree to have a look at what the Germans are doing to help those industries, including their steel industry, which are suffering a loss of competitiveness because of high energy costs?

Lord Davies of Oldham: My Lords, in that well known Welsh phrase, I was coming to that. The noble Lord has slightly pre-empted me. Because we already have the climate change levy in place at rates above those minimum levels—which I think was a significant part of the contribution made by the noble Lord, Lord Roberts—we do not think that when the draft directive comes into force it will cause significant change to the UK's arrangements. It will narrow the differential between ourselves and our European competitors. In those terms the implementation of the directive across the EU will help to create a level playing field—a phrase which I am always reluctant to use, but I cannot think of another one. That is my response to the point made by the noble Lord. I recognise that there is a point of grievance at present which needs to be addressed.

In considering help for the steel industry, we have to take into account European state aid restrictions specific to the sector. These restrictions prevent government funding for investment, restructuring and rescue aid. Successive governments and the industry have supported this policy and they have been successful in eradicating state aid and in creating a common base for all European countries. None the less, the Government liaise closely with the sector and, where permitted by state aid rules, have supported a number of initiatives specifically designed to improve the industry's competitiveness and strengthen the UK customer base.

Perhaps I may illustrate the kind of things that the Government are doing. The creation of the Metals Industry Competitiveness Enterprise (MICE) is introducing best practice lean manufacturing and supply chain techniques to the metals sector and to downstream industries. The National Metals Technology Centre (NAMTEC) has been established. Following requests from the metals industry the DTI researched the feasibility of having a source of metals expertise in the UK and now supports the establishment of NAMTEC, launched in October last year. NAMTEC will be of particular benefit to small and medium-sized enterprises in terms of their needs.

A third initiative is the Advanced Metals Technology Initiative (AMTI) which is playing a significant part in an area to which a number of my noble friends drew particular attention; namely, South Yorkshire. The AMTI has emerged from the work of the Steel Task Force in South Yorkshire. It is a 10 million project funded by the DTI, Yorkshire

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Forward and Objective 1 which has just started and will soon be producing results that firms in all the metals sectors in that part of the country can exploit.

We are working to ensure that the UK steel industry knows about opportunities, that purchasers know what the UK steel industry can do and that we can make progress in that respect. The noble Baroness, Lady Miller, referred to the US restrictions which are a significant problem for all European countries that seek to export to the United States. Of course, British industry has the highest level of exemptions from United States restrictions. We are paying a price—let us not underestimate the price. Nevertheless, we should not underestimate the work that has been done to make progress on this, nor that we perhaps benefit from our closer relationship with the United States than France, for example, enjoys at present.

My noble friend Lord Brookman, although he concentrated on the industry which he has served all his life and knows so much about, also introduced aspects of the broader issues of manufacturing, to which I shall now turn. The current slowdown is obviously impacting upon the manufacturing industry world-wide. The three largest economies in the world are concurrently experiencing weak economic growth for the first time in more than 30 years. We are seeing the knock-on effects of that with the current situation at Corus and in so much of our manufacturing industry.

However, I cannot stress too strongly that manufacturing is absolutely central to our future as a high technology, high value, successful economy. We cannot follow the pattern that has been depicted from the Simpson comment. We are not getting to the stage where manufacturing will disappear from the British economy. Of course not. A leading economy cannot have a manufacturing industry—

Baroness Miller of Hendon: My Lords, I did not say that. I commented on what Derek Simpson had said; that is, that by 2028, manufacturing industry will be dead. That was the headline.

Lord Davies of Oldham: My Lords, I appreciate that the noble Baroness was quoting Derek Simpson, but I merely seek to emphasise the fact that we reject his conclusion as regards the future for British manufacturing. Of course there are significant problems at present, but a great deal of the Government's activity is directed towards ensuring that we protect and enhance our manufacturing base.

We should not be unduly pessimistic. My noble friend Lord Jordan mentioned the success of the Airbus. That represents a very significant achievement by British and French manufacturing, although it does not use quite as much steel as perhaps we would like in terms of the other topic in our debate. Nevertheless, here is a world-beating project which is taking on some of the most significant competitors in the world, such as the great American aircraft manufacturing companies, and beating them. I agree with the noble Lord, Lord Razzall, who said that he could see no reason why the British economy should not match that

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of northern Italy. He is absolutely right to say that. Matching that economy requires a high level of investment and a highly skilled workforce. It does not require a quest to bring unit costs down to the levels of those in third world countries. That is how the economy of northern Italy has progressed.

I say to my noble friend Lord Dixon, when he spoke about the shipbuilding industry, that I agree that it is well placed to make a bid for the aircraft carriers when it is possible to do so. I know that my noble friend will play his full part in seeking to ensure that the order is brought to the shipyards of the North East. However, let me make the obvious point that, tremendously important that those orders will be in terms of jobs and the economy of the North East, it is remarkable how little succour they will bring to the problems being faced by the steel industry. Consider what a fractional element even two large aircraft carriers are in relation to the total production of UK steel. Therefore, even big contracts of that kind are in reality quite marginal.

I turn to another area where people are prone to suggest that, because we are seeing great developments in aerospace and aircraft manufacture, that must be a boon to the steel industry. However, these days so many high-technology products use relatively small amounts of steel in their manufacture.

We would say that we are committed to our manufacturing strategy, which has been developed since the recent Budget. It has been welcomed as a strategy that will maintain the current economic stability. The noble Baroness, Lady Miller, was critical of the Chancellor, but she should not underestimate the fact that the Chancellor's massive drive against the previous government's burden of public debt in this country releases levels of resources for potential investment which were not even remotely approached during their stewardship of the economy.

To further encourage innovation in the business process, tax credits have been introduced to keep the UK at the leading edge of science and innovation. I heard the point made by the noble Lord, Lord Selsdon, about that wonderful, although perhaps restricted, feature in terms of a "Silicon Valley" industry: the wonders of Formula One motor racing. Indeed, it is not widely known that some 70 per cent of the motor cars used for racing at Formula One level are made in the United Kingdom. Not many industries are more highly technological and highly skilled than that.

We have had a long debate on a wide range of topics and I have much to cover. The right reverend Prelate the Bishop of Peterborough and other noble Lords commented on the significance of the skills agenda. It is that issue to which the Government are paying the closest attention in the development of their education policy and the establishment of sector skills councils. We cannot talk about "high value added" unless we have in place the competence in our workforce to produce that added value.

My concluding response to the debate is to say that I recognise that we have heard a certain degree of criticism of the Government, but much greater criticism of the position of governments over the

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previous two decades when so many of these troubles were visited upon us. I hope that it has been recognised that there are reasons for optimism in the strategies being pursued, along with the assurance that the Government treat both steel production and the manufacturing base of this country with the greatest seriousness. That is why so many of our policies are directed towards enhancing those capacities.

7.35 p.m.

Lord Brookman: My Lords, I shall keep the House for only a moment because I see that noble Lords want to move on to the next business. I thank all noble Lords who have participated in the debate and thank them also for their kind remarks. I was interested in what was said by my noble friend Lord Desai. If I had heard his speech 12 years ago, colleagues such as my noble friend Lord Davies of Coity and myself would have thrown in the towel around 20 years ago.

This has been an interesting debate and I appreciate all the contributions that have been made. It will be a good read for many noble Lords tomorrow. I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.


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