UK Steel Industry — House of Commons, 2016-02-29
Topic: Macroeconomics
Alexander Cunningham (Labour, Centre-left): I want to concentrate my remarks on three areas: the critical role that steelmaking has in our economy; the considerable burden this energy-intensive industry faces; and the Government’s ongoing response to the crisis on Teesside, where thousands of workers lost their jobs with the demise of SSI and other plants. As others have said, steel is an important foundation industry, supplying materials to multiple strategic construction and manufacturing supply chains. Taken together, these industries represent 20% of those employed in the UK’s manufacturing sector and generate gross value added of £24.6 billion UK Steel reports that, despite its problems, the sector makes a £9.5 billion contribution to the UK economy, with an export value of £4.9 billion. It generates £90,000 of added value for every steelworker. It produces hundreds of high-skilled, high-value-added apprentices, vocational trainees and graduates. It is well linked to the UK’s innovation infrastructure, through partnerships with leading universities, participation in catapults and our own research and development investment, and all despite the burden it faces. I just wonder for how much longer that will be the case UK business rates are up to 10 times higher than those of many of our European competitors, such as France and Germany. Paul Turner-Mitchell, a business rates expert, says that property taxes in Britain are the highest, as a proportion of gross domestic product and total taxation, of all 36 OECD countries. A Select Committee on Business, Innovation and Skills report in December recommended that the Government reform business rates as they apply to manufacturing at the earliest possible opportunity, with priority being given to the removal of disincentives to invest in plant and machinery. Doing so would not need EU approval and would provide a more even playing field for UK steel producers. Exempting plant and machinery from business rates valuation would symbolise a commitment to rebalancing the economy, enhancing the UK’s attractiveness to inward investment in manufacturing and improving industry’s productivity, efficiency and competitiveness. Business rates are just one of the extra burdens suffered by our steel industry, as is the Government’s inability to act in Europe to halt the dumping of Chinese steel. In fact, our Government have helped to ensure that there is no impediment placed in the way of far east producers. Others have gone into that in detail and also mentioned the British Government’s failure to build British ships with British steel I want to focus a little on energy costs and the absence of a level playing field for energy-intensive industries. The damaging effects of energy taxes levied on the business in the UK, leading to UK energy costs being twice as high as those among EU peers, are well understood. This comes on top of regulatory costs charged across the EU, such as the EU emissions trading scheme. British policy measures add 26% to the typical electricity price paid by an energy-intensive consumer in the UK, with steel a major loser. Yet we have still to see the compensation package for energy-intensive industries implemented in full, and the sector is still paying 70% of the policy costs that the full package aims to address. The EU commission provided state-aid approval for proposals to compensate the industry in relation to the costs of the renewables obligation and feed-in tariffs in December 2015. Although we await the full implementation of the first part of the compensation scheme, there remains a second application that concerns competitors of those receiving compensation. Until that second application is approved, some companies are without access to much-needed compensation and exposed to 70% of climate change policy costs. I hope the Minister can give us an update on what is happening with that second application Madam Deputy Speaker, you know of the closure of the SSI plant in Redcar and the loss of other steel jobs in Teesside, many of which are from my constituency. We appreciate the limited action that the Government have taken on Teesside even if the Business, Innovation and Skills Committee report criticised the Government’s initial response, which was focused on compensating those affected rather than saying what could be done to save the plant. I recognise that we need to look to the future, so I ask the Minister what hope there is for steelmaking capacity on Teesside I am very aware of the hundreds of millions of pounds it will cost each year just to maintain the SSI site and keep it safe. I am also aware of the proposal from Lord Heseltine to have a mayoral development company in Tees Valley run locally by local politicians and his ambition to have the SSI site invested in that new body. He and the Minister for the northern powerhouse, the hon. Member for Stockton South (James Wharton), appear to be excited by the proposal, and the development organisation is very welcome. Many of us, including some of those same local politicians, are very concerned about what it will mean. Lord Heseltine was at pains to explain to the media, including on television, that the financial buck rests firmly with the Government both for the maintenance and the redevelopment costs of that site. Time and again, he claimed that the Government had to take responsibility. Tonight, I invite the Minister to confirm that not only will there be support for steelmaking in Teesside, but that there may even be the possibility of increased activity in the future, and that the open-ended commitment made by Lord Heseltine on behalf of the Government in relation to the SSI site, and therefore in relation to Teesside, is a commitment that she recognises and will ensure is actually fulfilled.