Comments yesterday n steel in Lords
When I have in the past had some responsibility for trying to recover the financial position of the odd distressed company—although nothing nearly as distressed as British Steel at Scunthorpe—I have always found it was an essential discipline to first of all institute very frequent reporting, because you need to signal to the executives undertaking the day-to-day work that the financial state of the company is at risk and that they need to give great priority to this. You need to help them get clarity over why cash is draining out of the business. This business, British Steel, which is under the operational control of the Government, is draining cash, we believe, at £500 million a year. That is a phenomenal rate of loss, which is going to have an obvious impact on the public accounts, at a time when we know that government money is scarce and there are many other priorities. We need to know rather more about why it is £500 million.
Is there any residual investment programme left? That would be the first thing to go when you are trying to save cash. Is it still committing money to raw material stocks? It clearly should not be allowing more material stocks. Does it have a very large stock of finished product which it is not able to sell? If that is the case, what is the plan for trying to move that stock on? What is the reality of the price level it is going to get for that stock? Obviously, stock is a mixture of volume and value, and you have to try to maximise the cash you can get for the stock you have got before you would normally go on to produce more. This plant has the particular problem that it has to keep producing, even if it is not able to sell enough of the product at a sensible price. You would expect regular reporting, certainly to the chief executive appointed by Ministers, but I would have thought that the Minister with day-to-day responsibility for this would know what is going on, and on the trading accounts, because a lot of the cash going out may be trading losses. You would want to see an urgent plan for selling more and economising on costs wherever you can, whether that is bought-in materials, the productivity of labour or other overhead costs that the business is incurring.
During the debates so far, I have not felt the Government’s urgency around this financial problem. Every pound that goes out of the door on losses that you are responsible for as a steel-maker is a pound that cannot be spent on the new and better industry that you really need in order to take the country forward. I am not blaming the Minister, who has been exemplary in his conduct and helpfulness—I am sure he wants, as we all do, a good outcome to this—but in those conversations within ministerial offices, it would be good if a Minister in the other place, for example, could make more Statements which showed that there was a plan and a determination to rescue this industry that we all wish to rescue.
In this group of amendments, there is talk of quarterly reporting. That is a big enterprise in terms of people and scale of loss. Quarterly reporting is quite common and normal now in the public quoted sector. It is a good discipline, even for the most profitable businesses in the world, because people like to make sure the trends are still good and the managers are in charge of it. I would have thought that quarterly reporting was the bare minimum, and if it was somebody’s day-to-day responsibility then they would obviously need rather more frequent reporting than that.
The public deserve quarterly reporting from this industry, which they now have a substantial operational stake in. I urge the Minister to think about more regular public clarity. I hope that such detailed, short-term regular reporting is going on. It would be good to get some good news out of the Government that they are applying the right kind of financial disciplines to control the outflow of cash. If they do not control the outflow of cash, it will end in tears and redundancies.
There will be an issue with the public interest case needed to justify nationalisation , if and when we get to the full nationalisation of British Steel at Scunthorpe. Many of us are unclear as to whether the Government’s aim is to find a medium-term or longer-term solution to the problem of how to keep the two existing blast furnaces running and keep a basic steel-making capability in the United Kingdom, or whether their policy aim is still—as with the previous Government and as is the case in south Wales—to move to closing the blast furnace and opening an electric arc furnace in a new plant, which may be on that land or somewhere else.
If it is the latter, it will be much more difficult to establish the public interest case for the complete nationalisation and transfer of the blast furnaces, because that will end in tragedy for the people working there, so it will no longer be the case that the main purpose is to keep the jobs. It will not resolve the issue of the electric arc furnace, because that will need separate grant aid and might even be better on a different site. We need to know more about the phasing. In the case of south Wales, the blast furnaces were closed before the electric arc furnace was available. If they did the same again at Scunthorpe, there could even be a period when the United Kingdom will not be making any steel at all on those two works, given the transition plan.
It would be very helpful if the Minister, who will have to take this policy on, gave us a little more on the Government’s thinking about the duration of the investment in the blast furnaces, and whatever information he has about the state of those plants and the ability to maintain continuous production there, and on the Government’s intention in their net-zero strategy, which implies that steel would have to be made in a different way.
I am grateful to the noble Lord, Lord Fox, for reminding us of the importance of contingent liabilities and the need for the Government to complete due diligence before any acquisition. He rightly says that in a hypothetical case—not British Steel Scunthorpe—it might be necessary to move quickly, and then there will have to be some trade-offs. But if we are talking about British Steel Scunthorpe, there is obviously no need to move quickly. The Government moved very quickly many months ago, and there can still be proper analysis. I would hope, indeed, that as Ministers and their chosen executives are now responsible for British Steel, while they do not own the assets, they would have done a lot of this very important preparatory work on discovering the contingent liabilities.
Where in Amendment 11, the contingent liabilities are mentioned by category, there is an omission which could be extremely important: liabilities to employees for past problems with safety and health, and—God forbid that this does not happen—for any liabilities that might follow now that the business is under the operation or control of Ministers and their chosen executives, if some safety or other health problem arose. Where people are running these very large, industrial businesses, with the obvious threats of a very powerful fire in the furnace and the dangers of extremely hot liquid steel being moved around, it is crucial that Ministers and their chosen executives have taken all the right decisions on making sure people have the right protective clothing, there are the right protocols, and there is an absolute segregation for the employees from the risks. There also needs to be an understanding of whether there have been any longer-term health risks from the atmosphere around the blast furnace or the intense heat of some working conditions.
If Ministers have not already done so, they need to take this very seriously. Whenever I was responsible for a big plant, my main nightmare was that something would go wrong on safety, and that would be unforgivable. I am not expecting the Government to give ground on these amendments, but it would reassure the House and the wider public if the Minister could tell us more about where they have got to, at least in general terms, with exposing the contingent liabilities on pensions, safety and employee health, as well as with the other financial matters mentioned clearly in these amendments.