Jonathan's contribution to the steel industry debate

Read Jonathan's contribution to the parliamentary debate on the steel industry.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC):

It is a huge pleasure to serve under your chairmanship, Mr Walker, and to follow some of the excellent speeches we have had this afternoon, not least the very passionate speech we heard from the hon. Member for Ogmore (Huw Irranca-Davies). If he succeeds in his ambition of gaining the seat in the Assembly for his constituency, he will be a great loss to this place, although I understand his aspirations to return home to the motherland once and for all.

We face two distinct choices as policy makers: first, do we just accept that the days of the domestic steel industry are over, that production in the UK cannot compete with cheaper production elsewhere, and that, in a global market, only the fittest will survive? Or secondly, do we stand firm in the belief that steel production is a vital strategic industry in Wales and in the UK and that all options must be explored and taken to save the industry, much in the same way that the Treasury responded to the banking crisis in 2008?

Plaid Cymru and I are firmly of the second view, because it is difficult to comprehend the impact on the Welsh economy if steel production was to cease in our communities. Tata and its supply chain supports nearly 20,000 jobs in south Wales and, according to the Welsh economy research unit at Cardiff University, its operations are worth £3.2 billion annually to the Welsh economy.

The industry is undoubtedly facing a perfect storm of a glut of cheap imports from China, Turkey and Russia, as well as falling prices and rising energy costs. Reuters recently reported that Chinese imports of reinforcement bar steel has increased from zero to 250,000 tonnes a year since 2012—a quarter of the market, directly undermining Celsa in Cardiff which specialises in that product. I think the hon. Member for Aberavon (Stephen Kinnock) mentioned the figure of 45%, which is 20% more than the figure that I mentioned. That just shows the impact of dumping by Chinese steel producers.

We need action, as the hon. Member for Newport East (Jessica Morden) said, at all tiers of Government—at Welsh, UK and European levels—if we are serious about saving the industry. The Welsh Government are probably in the best place to move swiftly, and I welcome the establishment of the taskforce, although I hope it will be more about coming up with ideas as opposed to being seen to do something.

Employment costs are obviously one major cost for steel producers. Tata contributes £30 million in business rates across its three Welsh sites, with 40% being measured on plant and machinery. Business rates are devolved and a Welsh Government-funded business rate relief scheme based on plant and machinery is one obvious possibility, saving around £12 million. The choice is quite simply a 40% hit on business rates from Tata on a temporary basis or a 100% hit if its Welsh plants go.

Secondly, the Welsh Government should be considering a Welsh public stake in Tata’s Welsh steel operations. I notice that a similar policy is Labour’s UK answer to the difficulties of the industry, yet at a Welsh level, the First Minister has ruled that option out. I do not particularly want to make partisan political points today, but if Labour is not prepared to pursue that policy in Wales where it has the power to do so, why should anyone take their UK policy position seriously? Our position, which we have put forward this week in the Welsh media, has been supported by Gerry Holtham, a member of the Labour party and perhaps the closest to a rock-star economist that we have in Wales.

A public-private partnership to develop the planned power plant at Tata’s Port Talbot site would be a huge vote of confidence in the plant, making it more sustainable. The planning process would need to be streamlined—perhaps the hon. Member for Aberavon will want to talk about that when he winds up, given the discussion we had privately a few days ago.

I notice that the UK Government are willing to loan £400 million to Greybull Capital, a private equity firm, to help it purchase Tata’s Scunthorpe site. The UK Government should be looking at similar support for Tata in Port Talbot—or to the Welsh Government, or on a combined basis. That sort of intervention would constitute an environmental improvement and therefore, in my understanding, would be legal under state aid rules. If the UK Government do not pursue that idea, many in Wales will be left wondering why they are willing to support steel plants in England and not in Wales.

The Welsh Government must radically change their procurement policy to promote domestic steel—I disagree somewhat on that with the hon. Member for Newport East. They have by far the worst record of the Governments of the UK. Again, state aid rules should not be used as an excuse. Domestic producers are competing against heavily subsidised and state-owned Chinese steel. In other words, it is not a fair and open competitive market in the first place.

At UK Government level, we need a clear indication that Ministers are on the side of the industry. I note that only one Conservative Back-Bencher is present, none from the Liberal Democrats, some from the Scottish National party and Plaid Cymru, and many from the Labour party. If there were a groundswell of support for the industry from Government Back Benchers in a debate such as this, I can imagine what effect it would have on the Government’s mindset.

Stephen Kinnock:

The hon. Gentleman mentioned the important issue of the power plant at Port Talbot, which has a green light for its planning. I understand that construction of the plant and its operation would save between £25 million and £30 million a year on energy bills for the Port Talbot plant, so it would be a huge saving and a great boost to the plant. Does he agree that it would be welcome if the UK Government and the Welsh Government came together in a dialogue, pooled resources and gave some support to Tata Steel, both financial and in kind, to facilitate construction of that plant?

Jonathan Edwards:

I fully agree with the hon. Gentleman. That was the point I was endeavouring to make. A one-off capital cash injection could have tangible benefits and would be a huge vote of confidence in Tata at Port Talbot and the communities of south Wales.

I challenged the Prime Minister yesterday about the huge contradiction in cheerleading the case for China to have World Trade Organisation market economy status, which would make it impossible to impose tariffs on steel, while at the same time belatedly calling for unfair price tariffs against China. Many hon. Members have spoken about that so I will move on to my next point.

The UK Government have a defining choice. Do they put the interests of the City first and deliver their wish that London becomes a centre for trading in the Chinese currency, or do they protect manufacturing workers? I hope that, for once, they will put the communities I serve before the City of London.

Port Talbot, Trostre and most of the supply chain are in a tier 1 European Union assisted area. As I told the Minister during the debate on a statement last week, the UK Government should be looking at innovative operating aids to reduce employment costs, such as a national insurance contributions holiday. State aid is permissible under EU law if there is unfair competition or market failure, as is the case in this instance. We should be taking action now and pressuring the European Commission for a derogation. We cannot afford to wait years for a decision.

Similar to what the Welsh Government are doing, the UK Government should be looking at its procurement policies to ensure that domestic steel is used in large infrastructure projects. The hon. Member for Aberavon made a valid point about EDF.

The difficulties facing the industry are not, of course, confined to Wales. The UK Government should introduce a temporary reduction in business rates for steel in England. That would trigger consequential funding for Wales, Scotland and Northern Ireland to help their industries within the devolved Government areas.

At European level, the Commission must wake up and smell the coffee. China is producing steel, selling it at below production cost and dumping it on the European market. It is a purely aggressive strategy aimed at decimating steel production in the EU. The Commission’s job is to act. We can contrast that with the response of the US Government who, according to Bloomberg, are taking steps to impose a 265% tariff on Chinese steel. As I have said, it is the UK Government’s job to press the Commission. If they refuse, my party’s call for the Welsh Government to have a direct role in EU decision-making processes to protect Welsh interests will become a battering ram.

The Commission’s investigations into Chinese steel dumping are taking far too long and its recommendations have been pitiful. For reinforced bar steel products, it recommended a measly tariff of only 9%. It is estimated that an investigation into coiled steel, which is made at Port Talbot, will take a year. The US—I am not usually a cheerleader for the US Government—takes only 45 days to conclude such investigations.

While European bureaucrats dither, Welsh workers are losing their jobs and the pace of action is simply not good enough. To those who argue that a Brexit is the solution to my complaint, I respond by telling them to look at what happened to the coal industry—we would be leaving the steel industry in the hands of a Westminster Government.

In reality, the steel industry in Wales faces massive challenges. I am informed that Tata in Port Talbot does not produce specialised products and therefore faces the brunt of the exports from China and other economies. The transition to a more modernised production system creating specialised steel will not be easy. It will require significant capital investment, but if we are serious about securing a future for steel production in Wales and across the UK, we need a range of temporary interventions to create breathing space for the necessary investment to be delivered.

In conclusion, this has been a deeply troubling week for Wales and our economy. The ongoing problems have been highlighted for a long time, yet the Labour-run Administration in Cardiff seem to stand passively by and do precious little, apart from blaming the UK Government. The Tory Westminster Government seem more interested in helping their friends in the City than in helping the working communities that I represent.


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