Steel Industry

Debate between Peter Bone and Tom Blenkinsop

Thursday 3rd November 2016 Westminster Hall

[Tom Blenkinsop]

I thank my hon. Friend for raising that. There are a number of issues within that general question that still hang over the industry. I am at pains to talk about the broader industry and the new, smaller companies that are emerging. The debate tends to be dominated by issues around Tata, for obvious reasons, but we need to look at how we develop smaller companies, hence our desire for the steel sector catapult to be established. Although those smaller companies have come to the fore, they have told me directly that if a steel sector catapult existed, they would have been able to get where they are now a lot quicker and with a lot less capital, which would release more capital to do other things or to develop other research and development potential. One of the most profound issues, which I will go into later on, is the British Steel pension scheme.

Producing steel is a massively energy-intensive process. Despite the Government’s policy, which compensates energy-intensive industries for the disproportionate impact of carbon reduction measures on them, British energy prices are still far higher than those in Germany and elsewhere in Europe. The steel industry is aware of the need to transition to low-carbon energy sources, but only in a way that makes business sense.

Everyone I have spoken to in the steel industry welcomes the inclusion of the energy portfolio in the same Department as the business and industry strategy portfolio. That makes sense, and it is about time it happened. However, the Department has yet to respond to the EEF’s five recommendations aimed at addressing the competitiveness of UK energy costs. Since the initial meeting with the Department for Business, Innovation and Skills on this issue in June, EEF estimates that the disparity between UK and European energy costs means the UK steel industry has paid £20 million more in energy bills than their continental competitors. What is being done on energy costs? What benefit has the sector felt since the creation of the Department for Business, Energy and Industrial Strategy?

[Mr Peter Bone (Wellingborough) (Con)]

The hon. Gentleman is making an excellent speech. Can he explain why energy costs are so much lower in continental countries than here? Is it something that we as a Government are doing wrong, or is there some other reason?

[Tom Blenkinsop]

Other colleagues may want to comment on this, but my view is that in general the energy sector is predisposed to giving the individual consumer cheaper prices, with the costs going more towards manufacturing. The consequences of that have led to some manufacturers going off grid; and a consequence of that may be higher prices for the individual consumer, as capacity cannot be fulfilled by larger consumers. In European countries such as Germany and Holland, there are discounted energy costs for large manufacturers but with the understanding that the individual pays higher bills. There is consensus, to a certain degree, that people are willing to pay higher energy bills in order to maintain manufacturing in their country so that they have a job—but that is with open political consensus. We as politicians need to talk about what type of economy we want. Do we want to move it away from finance and services back to a more balanced economy? We need to talk about that in terms of energy policy, but I will go into that issue in more depth later.

The Government can act to support the steel industry’s attempts to improve its energy efficiency and thereby cut emissions and costs by providing an energy efficiency fund. Such a fund could supply capital for companies to make improvements and efficiencies in the way they use energy, meaning they can better compete on energy prices and millions of tonnes of carbon emissions can be cut.

The second immediate challenge is that of the British Steel pension scheme. The scheme’s deficit, estimated at £700 million earlier this year, has been a major obstacle to the sale of Tata Steel sites. In response to that, the pension scheme’s trustees have asked if it would be possible to alter the scheme’s benefits in order to make it viable without a sponsor employer. The Government have been consulted on that option and on the alteration to section 67 of the Pensions Act 1995 necessary to alter the scheme’s benefits. We are yet to hear a statement on the consultation, but recently the pensions deficit has been drastically re-estimated at £50 million, due to the trustees taking advantage of the post-Brexit economic situation—I must mention that that has more to do the British Steel pension scheme’s investments in other nations’ stock, which has boosted the pension fund.

If interest rates were to rise and the scheme’s asset value continued to increase, hypothetically the trustees may wish to withdraw their request to change the scheme’s benefits, and therefore a change in section 67 of the Pensions Act may not be necessary. The compounded complications are that any change to section 67 could affect any other workplace pension scheme, and any other representative of any other constituency without a steel interest would be highly hesitant about voting for such an action. I hope we can keep in constant contact with the Minister, so that if the scheme’s benefits continue to rise, we can look at measures short of the scheme falling into the Pension Protection Fund, because that is fundamental to the existing Tata sites. The Government must act to explore that possibility, provide certainty in an uncertain situation and secure the continued viability of Tata Steel sites. The BSPS is a fulcrum of the continuation of the current Tata sites.

As well as the five asks, strategic decisions will need to be made soon by Government that have the power to end or secure the industry’s future. Those are decisions that come in the wake of Brexit. There are many implications for the steel industry of the UK leaving the European Union, from workers’ rights to an ability to attract expertise and investment from the continent, but I wish to focus on one: trade, and in particular access to markets and trade defence measures.

Earlier this week, I warmly welcomed the Government’s actions to secure investment, jobs and growths at the Nissan plant in Sunderland, via the production of the two new Qashqai and X-Trail models. That move is warmly welcome, not least because Nissan is one of the largest buyers of British strip steel, largely from Tata Steel sites. It is a shame the Government did not take the same decisive action when it came to the closure of the SSI Redcar steel plant over a year ago, which I am certain my hon. Friend the Member for Redcar will talk about. None the less, it seems the Government have reassured Nissan that it will have access to European markets tariff-free. That is fantastic news, but it is not just Nissan or the automotive industry that rely on access to tariff-free trade with Europe.

Over half of all British steel exports are to the European Union, therefore any tariffs on British goods would damage the health of UK steel. I hope the Minister will commit today to providing steel producers with similar assurances. Doing so would again demonstrate this Government’s commitment to the sector, and of course do much for those whose jobs who are dependent on the steel trade. The Nissan deal also reflects how big and powerful the industry players and the automotive lobby is as a whole. Steel requires its players to come together and command such attention. It must also gain the understanding of the auto sector and all the other industrial lobbies that the UK steel supply on their doorstep requires their clear verbal support.

Leaving the European Union presents both an opportunity and a threat in terms of trade defence measures—a threat in that it means we would leave behind the trade defence measures provided by the EU, modest and limited though they are, and an opportunity in that it allows this country to implement our own trade defences. As many here will know, the over-production of primarily, though not exclusively, Chinese steel and its dumping, sometimes at below-cost prices, in foreign markets poses a real and significant threat to industry here in the UK. Currently the EU’s tariffs on steel differ by product: the highest import duty is about 73% on heavy plate steel, whereas in the US in March duties were set at over 265%.

While Chinese production of steel did slow as global demand dipped, the latest International Steel Statistics Bureau statistics show that Chinese exports remain at a year high, with August levels being some 7% above last year. The problem is not going to go away; it will certainly re-emerge. However, this Government seem to have set their face against trade tariffs on Chinese steel, as two quotes reveal. The first, from the Chancellor, was on granting China market economy status. He said:

“Our position on China’s market economy status is that we gave certain undertakings to China and believe that we are bound to go down this route.”

Recognising market economy status for China would limit our ability to apply duties on Chinese steel, potentially opening up our markets to a flood of cheap steel, undercutting domestic producers and risking thousands of British jobs.

Commitments made to endear ourselves to China should not take precedent over commitments to steelworkers or common sense. It is obvious that Chinese steel is not made under market competition conditions, and it is also obvious that by campaigning for MES for China, the Chancellor is campaigning against the interests of British steelworkers. This may be further complicated by Brexit. If we campaign for market economy status for China—as a country, I add; that is the Government’s position—while we are in the EU, will not this Government be obliged to recognise that once we can do so unilaterally after leaving the EU? Perhaps the Minister can shed some light on that.

The second telling quote came from the Secretary of State for International Trade. During his speech to the Conservative Way Forward group, the right hon. Gentleman, now infamous for calling British business people fat and lazy, said we

“must turn our backs on…voices that tell us: ‘It’s OK, you can protect bits of your industry, bits of your economy and no one will notice’”.

That seems to set the right hon. Gentleman against any industrial strategy and certainly against trade defence measures for the steel industry. I hope that that misapplication of free trade dogma to trade with a communist country and its state-owned and subsidised steel industry does not spill over into Government policy. I hope Ministers from BEIS have explained the absurdity of that position to the Secretary of State; if not, I fear someone will have to very soon. Those two aspects of the Brexit negotiations are fundamental to any industrial strategy and I hope the Minister will outline today the conversations he has had with and the cases he has been making to the Chancellor, the Prime Minister and the Secretary of State for Exiting the European Union about Brexit and our industrial strategy.

I would like now to address my own Front Benchers. As a party, we have been vocal in campaigning to save our steel industry, and we should be proud of that, but, if our party is to help to revive the steel industry in the UK, as I hope it will, and not merely be its pallbearer, we must stop cutting off potential demand for British steel by opposing or sitting on the fence over major infrastructure projects. Heathrow will require 370,000 tonnes of steel and could support hundreds of jobs in the industry. Labour does not seem to have a settled opinion—I know mine—and we must be clear. Trident will support British jobs in the steel industry, despite the Government allowing French steel to be used in the vessels’ hulls, but Labour’s own leadership casts doubt on our commitment to this project, despite party policy and a consensus at our conference and among trade unions to accept it.

Shale gas is an example. Our party has vowed to ban the practice of fracking. The GMB union called this decision ridiculous, nonsense and madness, and my union, Community, said the decision was rushed and did not fully consider the evidence. Both unions have since signed a memorandum of understanding with United Kingdom Onshore Oil and Gas, the industry trade body. Two proud unions, with large private sector bases and affiliated to our party, are asking the party to back a proposal that would provide jobs in regions across the UK—not just jobs, but secure, well paid jobs that would help to stop our reliance on autocratic nations for our energy. It would offer people, not least the thousands of offshore oil workers being made redundant, well trained, highly skilled, long-term roles, but we have denied them that option. Shale gas would cut energy prices for the steel industry more profoundly than any tax break or subsidy. On Teesside, it would provide a gas supply to a much-needed chemicals industry at 50% less than the cost of conventional North sea gas.

The infrastructure and sites would also require thousands of tonnes of steel. The viability of British-made welded steel pipes for fracking is currently being explored. It is vital to both Corby’s and Hartlepool’s pipe mills. The industry is moving ahead without the Labour party. We should be shaping the shale gas industry, not ignoring it for our own satisfaction. We should be making sure it is safe, that it uses British steel, that energy price cuts are passed on to steel producers and that they organise their workforce so that it can bargain collectively and secure benefits for local communities.

Blanket opposition to infrastructure projects may offer the false comfort of the moral high ground, but it is not responsible. Failing to make these choices is not the action of a Government in waiting who intend to deliver for steelworkers. As a party, we must be pro-jobs and pro-steel choices, and not just attend marches and wear badges. I hope my party will think about these issues and choose jobs over familiar, fashionable and flawed opinion.