UK Steel Industry

Wednesday 3rd December 2014 Westminster Hall

16:00

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Mr Davies, and to have the chance to raise an issue that is of concern not only to me and my constituency, but to many Members from all parts of the House. It is great to see a number of them here with me, as well as the shadow Minister for these issues in the shadow Business, Innovation and Skills team, my hon. Friend the Member for Hartlepool (Mr Wright).

The UK steel industry and the associated metals sectors comprise more than 24,000 enterprises, which directly employ more than 330,000 people and were worth more than £45.5 billion to the UK economy in 2012. Indirectly, two to three jobs in the broader economy are dependent on each job in the metals sector. Steel, as many of my colleagues will attest, is vital for many of the UK’s strategic supply chains, such as those in the automotive industries, construction and energy.

As many will know, Cardiff South and Penarth has a long and proud industrial history. It is just a stone’s throw from Tiger bay, where the coal hewed out of the valleys of south Wales was exported to the world and where the East Moors steelworks sprang, establishing Cardiff as a major player in the steel-making industry in the late 1800s. Although the original East Moors complex was closed in 1978, I am pleased to say that Cardiff remains a major centre for steel production, which is currently done by Celsa. It has one of the most carbon-efficient electric arc furnaces in Europe and the world and rolling mills that produce crucial products, such as reinforcing bar, for such UK infrastructure projects as Crossrail.

[Mark Tami (Alyn and Deeside) (Lab)]

I am pleased that my hon. Friend has managed to secure a debate on this important topic. Shotton steelworks is in my constituency. It produces high-end, top quality coated products. Does he agree that the price of energy is harming this important industry, which could do so much better if it could compete with companies in Europe that have much lower costs?

[Stephen Doughty]

I absolutely agree. It is very much the case that from Shotton to Cardiff, from Skinningrove to Llanelli, from Scunthorpe to Middlesbrough and from Newport to Redcar, steel producers are being outflanked by significant challenges, including energy prices, which continue to increase unabated. The rules of the game appear to have changed. I want to focus on a number of strategic issues.

[Nic Dakin (Scunthorpe) (Lab)]

I congratulate my hon. Friend on securing this timely debate. Does he share my disappointment that in the autumn statement the Chancellor did not take the opportunity to bring forward mitigation on the renewables obligation for high energy users, such as the steel industry? That would have been a clear message today that the Government are on the side of steelmakers.

[Stephen Doughty]

I share my hon. Friend’s disappointment. I asked the Chancellor a question on that issue, and I was disappointed that he chose to make a political point, rather than engage with the serious issues being raised by many hon. Members.

I want to focus on a number of strategic issues. Whether it is energy prices, taxation, foreign dumping, uncertain future ownership or the lack of clarity in the UK’s industrial and infrastructure strategies, it is crucial for the sake of our future industrial and manufacturing capacity, as well as for jobs across the UK, that the steel industry has urgent, robust and bold action from the Government, not caution and bureaucratic handwringing alongside many warm words that make little difference in practice.

[Jessica Morden (Newport East) (Lab)]

Because of the challenges facing the steel industry, steelworkers have had to adapt, accepting changes to their terms and conditions and rising to the challenge of hitting the targets that companies have set them in difficult times. Does my hon. Friend agree that announcing some support for the steel industry is all very well, but delivering on it is crucial for steelworkers, who have worked so hard in difficult times in constituencies such as mine?

[Stephen Doughty]

That is absolutely the case. My hon. Friend speaks about her constituency; employers at Celsa in my constituency have taken some hard decisions to ensure that the company continues to thrive and go forward. We need that kind of commitment from the Government, too.

The steel industry does not need posturing or the erection of barriers to trade or unjustified protection from fair competition; it is simply asking for action to level the playing field and ensure that we do not offshore carbon emissions or contract out our potential domestic growth generation to such places as China and Turkey.

[Andy McDonald (Middlesbrough) (Lab)]

Does my hon. Friend agree that there is terrific knowledge, skill, innovation and expertise within the Community union? Tata Steel would be well served if it exploited that collective wisdom and experience, because that could be the solution to keeping its operation intact and thriving.

[Stephen Doughty]

I wholeheartedly agree. My hon. Friend mentions the Community union, which has many members in my constituency and those of other Members present. It provided a helpful briefing for this debate and continues to speak out with a strong voice on these issues. Community estimates that the energy prices faced by UK steel producers can be 50% higher than those faced by our main European competitors, such as Germany. The Minister might not be aware of this, but green levies in the UK are two to three times higher than those faced by European competitors.

I firmly believe that we need a responsible and supported transition to a low-carbon economy, but it would be absurd if ill-fitting policies for this and other energy-intensive industries resulted in carbon leakage that leads to higher global carbon emissions. The Celsa plant in my constituency uses recycled steel in a carbon-efficient process, and it would be a tragedy if some of that production was lost to China, where the same carbon emissions standards and local environment standards would not be followed.

Earlier this year, the Chancellor said that manufacturing continues to play a key role in the UK’s economic recovery, but that the cost of energy acutely impacts on the international competitiveness of the sector, particularly for energy-intensive industries. I agree, as I am sure do many of my colleagues and the French and German Governments, but actions speak louder than words. Where the UK Government has failed to act robustly and urgently to level the playing field, others around the world have been taking action, including Germany and France. Unfortunately, that is leaving the UK at a disadvantage. As a close observer of what happens on the continent, the Minister might know that the French Senate recently debated finding a mechanism to fix the electricity cost for energy-intensive users at a maximum of €30 per megawatt-hour, compared with the €73.50 per megawatt-hour in the UK. That is a stark contrast.

The Minister might be aware that there has been extensive correspondence between the Department for Business, Innovation and Skills and me and other Members on these issues. The announcements in the Budget earlier this year on an energy-intensive industries compensation package were welcome, but many of the measures will have no immediate impact, which presents a serious risk.

My hon. Friend the Member for Newport East (Jessica Morden) mentioned this issue. I was deeply disappointed by the Chancellor’s answer today. I simply asked whether he was content with the decision—I had been told that the Minister for Business and Enterprise, the right hon. Member for West Suffolk (Matthew Hancock), would be responding to the debate, and I am disappointed that he is not here—that he and that Minister made not to bring forward that package. That decision is deeply disappointing to many of the steel producers in this country.

I am sure that the Minister has received many bulging red boxes full of cautious and bureaucratic advice from officials on the issue, but it is ultimately a political decision for Ministers to interpret European guidelines and decide whether there is a possibility of retrospective exemption and renewable sources support compensation. The bottom line for our steel producers is that in practical terms many of them are paying more taxes than they paid three years ago. They are finding themselves at a growing competitive disadvantage. The Minister’s cautious approach stands in stark contrast to the proactive and decisive one taken by Ministers in other EU member states. I am sincerely asking whether he and his ministerial colleagues will take another look at this crucial issue.

[Nia Griffith (Llanelli) (Lab)]

Does my hon. Friend agree that it was the unilateral imposition of the carbon floor price at a particular rate that has caused the problems? The steel industry is not asking for charity; it is simply asking for a level playing field. We want the situation put right as soon as possible.

[Stephen Doughty]

I wholeheartedly agree with my hon. Friend’s points.

On another issue, the Minister here today will know that business rates are one of the few taxes that are non-cyclical and fixed at a level irrespective of economic or market conditions. As such, business rates are treated by industry as a fixed cost, which is given much greater prominence when making investment decisions. According to the industry, the fact that business rates are five to 10 times higher in the UK than in EU counterparts represents a significant comparative distortion that undermines the UK as a destination for investment.

Will the Minister say whether any consideration has been given to removing plant and machinery from the business rates valuations? What about alternative approaches for large-scale manufacturers, with a view to adopting a simplified model based on capital values rather than hypothetical rental values?

I come to foreign dumping, responsible sourcing and supply-chain access, huge issues for UK-based steel producers—and the environment is changing all the time. We have been shown some shocking statistics. I mentioned the reinforcing bar produced by Celsa in my constituency. Hopefully, the Minister has seen the data that show that imports from China now account for more than a third of overall UK market share, which is a dramatic increase in recent years; the figures for this year show an even greater increase. We also see problems with imports from Turkey.

There are also questions about traceability in the supply chain and the fact that the classification of such products often does not meet British standards. In the extreme, that has potentially serious implications for the future structural integrity of buildings or infrastructure projects in which non-compliant rebar or other steel products have been used.

The UK Certification Authority for Reinforcing Steels has been too slow and ineffective in its response to date. Quite frankly, the Government’s response has also been disappointingly slow, given that I understand that misclassification was raised at the steel contact group in October 2013 and again in June 2014.

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

My hon. Friend is making an excellent point about the importance of manufacturing to his constituency. We know that Celsa was built under the tenure of the previous Labour Government, much like the blast furnace at the Redcar steelworks near my constituency that was built under the Callaghan Labour Government. We are potentially on the verge of putting 46% of Britain’s steel making in limbo. We need strong opposition from the Government in relation to Celsa as well as Scunthorpe’s four-blast-furnace operation. We need clear direction and a clear message from the Government about what steel production will look like in the future.

[Stephen Doughty]

I thank my hon. Friend for those well made points; I wholeheartedly agree with them. On traceability and the quality of products used, the Government could do something right away: ensure that all Government or Government-backed projects have a robust, responsible sourcing requirement.

As I have said before, although the Government’s sector- by-sector approach is welcome, it must be dramatically accelerated. That would, without doubt, serve to stem some of the questions about safety and sustainability rightly coming from concerned people inside and outside the industry. Reports that Chinese rebar has been failing British standards tests coupled with the news that one third of rebar used on UK sites is Chinese should have red lights flashing on ministerial dashboards, not only in BIS but in other Departments.

[Nia Griffith]

Does my hon. Friend share my disappointment that Ministers, in their reply to the steel group, rather brushed aside any option to intervene in what CARES is doing? Will he reiterate to this Minister the need for them to look at that thoroughly?

[Stephen Doughty]

I wholeheartedly agree; I was disappointed by the Ministers’ response. Like many others here, I saw a glimmer of hope when the Secretary of State for Business, Innovation and Skills responded to a question on that from my hon. Friend the Member for Hartlepool, who is sitting here. The right hon. Gentleman said that there would potentially be an inquiry into the testing process of rebar steel. However, since then we have been told—not only publicly, but in answer to parliamentary questions and informally—that the Secretary of State misspoke, and the executive director of CARES has said that it has not been contacted by the Government.

I hope that the Secretary of State did not misspeak, but if he did, perhaps the Minister can clarify the situation. More importantly, will such an inquiry be considered? Ultimately, people want to see one because they want to know that the steel products being used are safe, sustainable and responsibly sourced.

[Lilian Greenwood (Nottingham South) (Lab)]

My hon. Friend is making a powerful case. Given that Network Rail is due to invest billions of pounds in track renewals and that major rail infrastructure such as Crossrail, High Speed 2 and possibly Crossrail 2 are coming up, is it not shocking that the future of Tata’s long products steelworks at Scunthorpe, which I have visited and produces much of the UK’s high quality rail, is so uncertain?

[Stephen Doughty]

My hon. Friend makes a crucial point about not just the industry, but the crucial infrastructure projects, especially in transport, that it supports. It is crucial that we get that right.

I mentioned Celsa’s contribution to the Crossrail project. The only responsible sourcing scheme in the UK that guarantees cradle-to-grave traceability for construction steel products is BS 6001, which was crucial to Crossrail. Will the Minister say whether the Government intend to ensure that all public projects apply the same standard in a timely fashion?

Ultimately, each of the issues and concerns that we have raised can be considered on its own, but there is an increasingly apparent need for a detailed, workable industrial strategy for metals, including steel. The Minister might jump to his feet in a moment and cite the development of a UK metals strategy as showing that the Government are on the case, but by all accounts, that is still in its early development stages and is not even guaranteed to receive official backing, despite being funded by BIS.

Indeed, we are more than four and a half years into a Government who chose not to include the metals industry among their sector-specific industrial strategy and who now, quite frankly, are playing catch-up. We have talked about procurement and other investment decisions, but the UK cannot afford to lose out on major public infrastructure projects, as Community made clear was the case with the £790 million contract to supply steel for the new Forth road bridge. Tata steel’s plant just down the road could have supplied more than one third of the required steel, but instead the contract went to producers in China, Poland and Spain.

[Tom Blenkinsop]

The Minister will probably also agree that that was primarily the responsibility of the Scottish Executive, who did not play their part in trying to support the local Scottish industry. It would be interesting to hear the Minister’s response on what the UK Government said to the Scottish Government at a time of trying to support UK steel rather than Chinese imports.

[Stephen Doughty]

My hon. Friend makes a strong point and I would be interested to know the answer to that question as well. Many steelworkers and those who work in related industries throughout the UK want to see the Government standing up and backing the steel and metals industries here—not seeing major projects that could be generating wealth, jobs and opportunities in this country all ending up with Chinese products. I have already raised concerns about the quality and traceability of some of those products.

In conclusion, I will ask the Minister a few questions on which I would appreciate answers. I mentioned dumping by China and Turkey. Will he outline what representations Ministers at BIS have made to other EU member states, the European Commission and the Council on support for an anti-dumping measure?

Will the Minister outline whether there have been discussions on a UK Government responsible-sourcing requirement? Would he be willing to facilitate a meeting between the Chancellor of the Exchequer and colleagues concerned about these issues to discuss the use of steel in UK infrastructure projects and how procurement can drive the future of the industry?

Will the Minister clarify what assessment the Department has made of reports that Chinese rebar has failed British standards tests, given that much of the steel used in the past year on UK sites has been Chinese? Has he had discussions with other Departments about any risks to the future structural integrity of building and other infrastructure projects?

As I said earlier, will the Minister, with his colleagues, be generous and look again at the decision not to bring forward compensation packages to January 2015? That is crucial. Will he detail what discussions there have been in BIS on that and why it was decided not, for example, to make an encouraging announcement on that today in the autumn statement?

We have mentioned China and Turkey. Will the Minister give an assessment of reports that India is now also looking at subsidising its steel industry to compete with cheaper Chinese imports? What assessment has been made of the US Department of Commerce’s decision to impose anti-dumping and anti-subsidy duties on imports of carbon and alloy steel wire rod from China in reaction to a massive increase in its shipment?

Any one of the issues that I have outlined, in addition to those that I have not had time to mention, is enough to put serious strain on any business, but the cumulative effect is a matter of grave concern to the British steel industry. The risks are real and the threats are intensifying, so urgent and robust action is required from the Government. If capacity is put at risk, that could have serious consequences not only for the jobs and communities that depend on those industries, but for UK infrastructure priorities. I hope that today the Minister will give some encouragement to UK steel producers and their employees.

16:19

[The Minister for Culture and the Digital Economy (Mr Edward Vaizey)]

It is a pleasure to see you in the Chair, Mr Davies, if a little disconcerting. I look forward to participating in the debate under your chairmanship.

I congratulate the hon. Member for Cardiff South and Penarth (Stephen Doughty) on securing the debate, which is the second one I have done on British steel. It is always reassuring to see the passion and knowledge of the Labour Members in the Chamber, who represent many different steel interests in their constituencies.

I hope that the House will not take it amiss if I also thank in person once again the hon. Member for Middlesbrough South and East Cleveland (Tom Blenkinsop), who was kind enough in a previous debate to mention my late father’s work, “The History of British Steel”, because it is the 40th anniversary of the publication of that seminal work.

[Mr Iain Wright (Hartlepool) (Lab)]

Will it be reprinted?

[Mr Vaizey]

It will be if this level of interest in the House is maintained. This year is also the 30th anniversary of my father’s death, and it is nice that he can be mentioned in Hansard, because he was a Member of the other place, thanks to Harold Wilson.

[Stephen Doughty]

The Minister mentioned that this was the second time that he had had to respond to a steel debate. I appreciate that his family has a strong tradition in such matters—I enjoyed hearing about it in a previous debate—but where is the Minister responsible for the issue today and why has he not been present now at two such debates?

[Mr Vaizey]

Hansard has on the record the reason why my right hon. Friend the Minister for Business and Enterprise could not attend the previous debate. I gather that today he is assisting the Chancellor with the autumn statement, because his brief covers a wide range of issues. Indeed, Mr Davies, you are an expert on the working relationship between the Chancellor and the Minister for Business and Enterprise.

[Nic Dakin]

Are we to understand that the Minister is now the Minister for steel, because he has shown far more steel on the issue than the Minister to whom he was just referring?

[Mr Vaizey]

I do not wish to sound churlish, but it is said that one should be beware of Greeks bearing gifts, and one should also be beware of Labour Members, however much one admires them, bearing compliments.

The hon. Member for Cardiff South and Penarth is working hard to secure a long-term future for the steel industry in his constituency. He has been an assiduous champion for Celsa and has facilitated meetings between it and Ministers. I picked up on about nine points made by hon. Members during the course of the debate, but he left me with five or six specific questions, mostly focusing on efforts to mitigate the impact of high energy prices and of competition, which from his perspective is unfair—I hope that I am not speaking out of turn in putting it that way—and on what the Government are doing about things. He also asked about the future strategy for the steel industry.

I have quite a long speech, but the hon. Gentleman spoke rapidly, if clearly, and the time left to me is not long, especially given the level of interest in the debate. I will try to pack in as much in the short period available as he managed.

It is well known that the steel industry is cyclical, and we also know that it has faced particular difficulties in the past few years, especially with the economic downturn having a major impact on construction, leading to overcapacity and severe competition throughout the world. It is worth saying, as I did in the previous debate, that the UK remains a significant player in the global steel market. We have replaced France as Europe’s second largest producer of steel and we have overtaken Italy. It is worth remembering that we continue to manufacture to a high level in this country.

My right hon. Friends the Minister for Business and Enterprise and the Secretary of State for Wales met the hon. Member for Cardiff South and Penarth and representatives of Celsa to talk about the company’s concerns, in particular the policy issues, which it is important to note affect many other steel companies in the UK as well. The Minister for Business and Enterprise replied at the beginning of this week to the letter that was sent out by Celsa following that meeting.

The first major issue raised at the meeting and in the debate today was compensation for energy-intensive industries for the indirect costs of the European Union emissions trading scheme and the carbon price floor. The hon. Member for Cardiff South and Penarth knows that the Government are trying to compensate electricity-intensive industries for the indirect costs of the renewables obligation and the feed-in tariff. We are also seeking to exempt EIIs from the costs of the contract for difference.

The mitigation has not been brought forward, because we need to seek state aid clearance from the European Commission. It took 18 months to obtain Commission state aid clearance for the carbon price floor. The hon. Gentleman and Celsa would perhaps like to see the Government being what they might describe as more robust, but clear state aid clearance is important. As he knows, if aid is provided before state aid approval is given, technically that would be illegal and we run the risk, if approval is not given, that the company would have to pay back the state aid. That is the reason. I am sure that the Chancellor, if he could wave a magic wand, would wish to bring forward mitigation, but we have to go through the process.

The hon. Member for Cardiff South and Penarth also talked about procurement. We have greater transparency of opportunities through the publication of procurement pipelines, which now cover 19 sectors. We have a simpler public procurement system; we have abolished the pre-qualification questionnaires for low-value contracts; and we help suppliers to find contract opportunities via a single online portal. We are working with industry to map supplier capabilities. We want to quantify the opportunity that exists to maximise the economic benefit for the UK—of course we do. Where there are capability gaps, sectors will encourage domestic suppliers to expand to fill them, with support from the Manufacturing Advisory Service.

The hon. Member for Middlesbrough South and East Cleveland tried to tempt me to have a pop at the Scottish Executive over the Forth bridge. My understanding is that the approaches to the bridge are to use British Tata steel, but I cannot comment on the procurement process of the Scottish Executive—[Interruption.] Perhaps the hon. Member for Na h-Eileanan an Iar (Mr MacNeil), commenting from a sedentary position, would like to say why the Scottish Executive procured from China, Poland and other markets.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

I only wanted to ensure that the Minister knew the difference between the Executive and the Government. “The Executive” is what Labour did not have the courage to call their Government in the past; “the Government” is what exists now.

[Mr Vaizey]

We are disappearing down a particular Scottish cul-de-sac. I will leave that as an argument between the Scottish National and Labour parties.

We are working to strengthen existing supply chains by encouraging primes to adopt a collaborative and long-term approach to their suppliers. The hon. Member for Cardiff South and Penarth discussed Chinese imports of rebar. The United Kingdom Accreditation Service looked at the complaint by UK Steel and concluded that CARES had responded in an appropriate way to the concerns expressed in line with the expectations and requirements of the accreditation standard. I can tell him, however, that there has been an increase in vigilance on the part of CARES, with increased sampling and more checks. We have also been advised that, as a result of ongoing discussions between CARES and UK Steel, and of the further testing of some non-compliant imports, CARES visited the Chinese steel mill concerned. CARES conducted further sampling and testing, but it did not find evidence of stock production being non-compliant. On that basis, we genuinely think that we are doing everything possible, although we may be able to do more if the industry provides us with additional evidence of what it thinks that we should investigate.

[Tom Blenkinsop]

The issue of whether it was a Scottish Government or an Executive who sold steelworkers in Motherwell and the rest of the UK down the Yangtse is irrelevant. The real issue is whether the Secretary of State for Business, Innovation and Skills has an ongoing inquiry. If so, is it looking at the steel products that are sitting on dockyards or in warehouses for more than 12 months at a time, rusting away and undermining any usage in a construction project, because of health and safety?

[Mr Vaizey]

I will take that specific point back to the Secretary of State. As I said, there have been discussions between UK Steel, UKAS and CARES. The Government take an interest in such issues. We will go back to those organisations if there is appropriate additional information.

Let me comment on anti-dumping quickly, because time is running out. We have been in contact with the European Commission on a number of occasions over the past year. We have had face-to-face meetings and we have asked the Commission to look at the case for launching an anti-dumping investigation into Chinese rebar imports. The problem is simply that Chinese rebar is only being exported, as I understand it, to the UK market and anti-dumping actions are taken at the European level, which presents serious legal difficulties for the Commission. We think, however, that the Commission is genuinely trying to find a way round the problems. We check regularly with it on progress and encourage it to take action, but at this stage a more aggressive approach might be unproductive.