Oral answer (Lords) on Steel Sector - July 12

Tuesday, 13 July 2021 09:14

Asked by

Lord Allen of Kensington
To ask Her Majesty’s Government what is their industrial strategy for the steel sector.

The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)
My Lords, the noble Lord will know that we recognise the importance of the steel sector to the UK economy and in supporting other domestic industries and local communities. Our broad action, led by the steel council, to create a competitive, sustainable and low-carbon future for the sector supports our plan for growth, which succeeded the industrial strategy published more than four years ago.

Lord Allen of Kensington (Lab) [V]
I thank the Minister for that reply. I welcome the Government overturning the decision of the Trade Remedies Authority on the removal of safeguard tariffs. I fear that, if they had not done this, the consequences for the industry would have been severe. Another severe problem for our steel sector is that the energy costs applied to steel production in the UK are far higher than those of our foreign competitors. Will the Government look urgently at what we can do to reduce this competitive imbalance?

Lord Callanan (Con)
The noble Lord makes a very good point about the high energy costs. We have provided more than £550 million in relief to the steel sector since 2013 to make electricity costs more competitive. Of course, we continue to keep the matter under review and to have discussions with the sector.

Viscount Hanworth (Lab)
If Britain is to have an industrial future, it needs a domestic steel industry. It needs a low-carbon industry to replace one that is a large emitter of carbon dioxide—as are the foreign industries from which we have been importing increasing quantities of steel. To create a low-carbon industry which employs electric arc furnaces and uses hydrogen as a reducing agent requires considerable investment. It also requires protection from foreign competition by a stringent carbon tax. Are the Government prepared to overcome their usual reluctance by providing funds for this investment? Are they prepared to impose such a carbon tax on imported steel?

Lord Callanan (Con)
We have supported the steel sector extensively over the years and I outlined some of the money that we have spent. The noble Viscount will know that decisions on taxes are of course a matter for the Chancellor. I am sure that if there are any actions, he will hear of them directly from the Chancellor.

Baroness Redfern (Con) [V]
My Lords, among the Government’s aims to level up and on the net-zero agenda for the British economy, there is a true agenda for steel. The Government have also expressed a desire to improve public procurement of steel. Will there be further proposals so that the tendering process for steelworks contractors includes requirements to provide supply chain plans, advertise steel supply opportunities, report on the origin of steel ultimately used and, finally, justify why they have not used UK-made steel?

Lord Callanan (Con)
We are working hard to make sure that UK producers of steel have the best possible chances of competing for and winning contracts across all government procurement efforts. The joint industry-BEIS Steel Procurement Taskforce, launched on 12 March, shows our willingness to support the sector and aims to work with it to promote the unique selling points of UK steel.

Lord Grantchester (Lab) [V]
The Government’s recent U-turn to bring forward emergency legislation to extend steel safeguard tariffs is good news, but this goes back to 2017, when the House first debated the Trade Bill. It is a mess of the Government’s own making. Can the Minister explain how the Trade Remedies Authority will be urgently reformed to prevent more anguish and uncertainty for the steel sector as well as for other businesses and industries?

Lord Callanan (Con)
I am pleased that the noble Lord welcomed the decision that was taken with regard to the recommendations of the Trade Remedies Authority. Of course, we keep all these matters under constant review but, as I said, we will continue to work with the sector to see what new opportunities there are and how we can help it in future.

Lord Oates (LD)
Can the Minister tell the House what plans the Government have to exploit the UK’s lead in the manufacture of the electrolysers used for green hydrogen production—manufacturing which is based in the great steel city of Sheffield—in order to make the UK the global hub for green steel production?

Lord Callanan (Con)
The noble Lord is quite right that hydrogen-based steel making is one of the many technological approaches we are looking at for the sector’s future. We announced the £250 million clean steel fund to support the UK steel sector to transition to low-carbon production, and we plan to establish the net-zero hydrogen fund with £240 million of capital co-investment to 2024.

Lord Udny-Lister (Con)
My Lords, the steel industry is badly undercapitalised and needs investment, both in labour and capital, so that it can modernise. This has already been asked but, first, will my noble friend agree to look again at energy costs? Even with the government subsidy, they are still way above those of our European—and certainly Far Eastern—competitors. Secondly, will he look seriously at putting a tax on scrap metal, which would ensure that it stayed in this country and was used in the newer electric arc furnaces, thereby making them viable?

Lord Callanan (Con)
My noble friend is right to point to the problems for the sector. I mentioned in an earlier answer that we have provided more than £550 million in relief to the steel sector for its electricity costs but, of course, we keep these matters under constant review. We are aware of the problems that high electricity prices cause for the sector. On his question on scrap, we want to ensure that the metals recycling market continues to work effectively for all stakeholders, whether that is for metals recycled by steel producers or the cast metal sector.

Baroness Wheatcroft (CB)
My Lords, the UK steel industry has shrunk drastically over the last quarter of a century. In 2019, we produced just 7 million tonnes, which put us eighth in the league of EU producers. Does the Minister have in mind a figure for what the UK steel industry should be able to produce in order to fulfil the plan for growth? Will he also say whether in providing subsidies for automobile manufacturers in the UK, there is a stipulation that they should buy their steel in the UK?

Lord Callanan (Con)
I understand the points that the noble Baroness makes. My noble friend Lord Grimstone is looking forward to considering the outputs of the procurement task force. However, we should recognise the importance of continuing to treat suppliers equally and fairly through open competition. Keeping our procurement market open to international competition ensures better value for taxpayers and for UK industry.

Lord Bradshaw (LD) [V]
Can the Minister tell the House what proportion of the steel being used now in HS2 construction is British steel, and whether any effort is being made to ensure that more British steel is used there?

Lord Callanan (Con)
For HS2, our 2021 steel procurement pipeline estimates that 1.95 million metric tonnes of steel are required in phases 1 and 2. So far, all reported structural steel used has been UK-produced.

Baroness Jones of Moulsecoomb (GP)
In view of the climate emergency that we are all facing, the Swedish Government have pushed forward on their aims to be fossil fuel-free by 2024, using the hydrogen technology that somebody has just mentioned. How many years behind are the British Government?

Lord Callanan (Con)
I know that the noble Baroness feels passionately about these matters, and we share her enthusiasm for decarbonising the industrial sectors as quickly as possible. She will know that decarbonising UK industry is a core part of the Government’s plan for a green industrial revolution, which I am sure she will support. The industrial decarbonisation strategy commits the Government to work with the steel council on the implications of the Climate Change Committee’s recommendation for UK-based steel makers to be carbon neutral by 2035.

Lord Razzall (LD)
My Lords, the Minister will obviously be aware of the significant role of GFG in our steel industry. Have the Government permanently ruled out the provision of finance to GFG and its plants? If this is only temporary, are the Government investigating GFG and, if so, which departments are doing so and is the Minister confident that a conclusion will be reached shortly?

Lord Callanan (Con)
Ultimately, it is of course for the company to manage its commercial decisions for the future and to find a successful buyer, but we hope this company succeeds with its plans to refinance. With regard to investigations, the noble Lord will know that I cannot comment.

Lord McConnell of Glenscorrodale (Lab)
My Lords, I declare my membership of the Community trade union, which represents steel-workers, and my former role as Member of the Scottish Parliament for Motherwell and Wishaw—a proud steel-making constituency, where the number of jobs today is a fraction of what it was in the past but where real quality steel is still made at the Dalzell works. Therefore, I ask the Minister to confirm today, on behalf of the Government, that they will work closely with the Scottish Government, who have a role in both procurement and decarbonisation. We need all levels of government in the UK to work together to ensure a strong future for the UK steel industry, in Scotland as well as the rest of the UK.

Lord Callanan (Con)
I can certainly give the noble Lord the assurances that he is looking for: we will work with all partners, domestic and international, in order to ensure that the UK steel sector has a viable future. Of course, we all know the challenges that it faces, but we are committed to doing what we can to help it. I mentioned the steel council, which was reformed, with government, the industry and the trade unions working together to produce a viable future for the industry. It has met twice already and will meet again further this month, chaired by my right honourable friend the Secretary of State.