Lord Fox (LD)

My Lords, there may be far fewer of us here today than there were in April, but the concentration of steel expertise was raised accordingly. That caused me to have to reach back in my own experience to at least try to come up with something. I worked largely for the users of steel, but in my last corporate role I worked for a company that owned an electric arc furnace in the United States to produce powder metallurgy from used cars. Standing in front of an arc as the electricity goes into the crucible, you can viscerally feel that power that is used to melt scrap metal; it is quite an experience, and it puts in context what these much larger arcs must be doing. I congratulate the noble Baroness, Lady Lloyd, on her maiden speech. There were moments later on when I felt like I was gatecrashing a reunion but, leaving that to one side, I look forward to her role going forward in your Lordships’ House. I was also delighted to be on the Benches when my noble friend Lord Mohammed made his speech because he established a point at the beginning: of course there are mills and plants, and there are supply chains, but they all lead to communities, which lead to families and people. That is why I turn to the noble Lord, Lord Hannan, and say: yes, we must be careful about nostalgia, but we have to remember where this industry has come from, what it has meant and what we have to do to try to make sure that its people can come along with whatever the future strategy is. I was grateful that the noble Lord, Lord Mohammed, put us in that position. We have this debate today because of the amendment that we pushed for during the original passing of the Bill, and I hope it will bring some scrutiny. To that end, I will probe quite a few of the issues, and I hope the noble Lord, Lord Stockwood, will have the chance to answer every one of my questions and to give his maiden speech. But, if he is unable to do so, I hope that the people sitting in the Box behind him will be able to respond in due course. As we have heard, there is plenty to discuss and there are plenty of questions to ask. A lot has happened since that debate in April, but some things have not happened. The blast furnaces in Scunthorpe were not shut down, which is a very good thing, and we should applaud that process. Then, in July, the US President did not double tariffs to 50%; that left the UK at 25%—but, of course, subject to future whim as yet unknown. These days, that seems like a win, but given that less than a 10th of our steel exports are to the USA, it is very much less significant than what may or may not be happening with our relationship with the European Union. As we have heard, the EU’s 50-50 proposal would be pretty devastating to half of the 80% of our exports that go there. This was announced in October and, as we have heard, it is subject to approval from member states, the Parliament and WTO negotiations. It would cut quotas from the UK into the EU by half and create a new 50% tariff applied to all imports above that slashed quota. That would leave tariff-free exports at 18.3 million tonnes for the UK—a 47% reduction from 2024. I of course associate myself with the cry from the noble Lord, Lord Liddle, for us to join a customs union, but, leaving that to one side, I was interested when the Minister said that, in the event that such a thing happened, the Government would take any necessary action. I wonder what legal framework the Government will apply to take any such action. The EU has trade defence instruments, but we do not have the same instruments—we chose not to adopt those post Brexit. So our relationship with trade retaliation and the WTO, and our stated aim to maintain international law, is quite a compromised position. I would be interested to hear from the Government how such retaliation measures could be justified within international law. Turning back to the US, can I ask whether the Government are still working on their stated aim of securing 0% US steel tariffs, which was paraded at one point during the various discussions? Nothing has surfaced. Is this now officially dead? When we look at this sector—we have heard about the various elements—it really is a sad tale, in many senses, of a sector in decline: of a rescue and sale, and re-rescue and further decline, in a series of downward steps to leave us in the position we are in now, with a very small steel industry, as we have just heard. Essentially, all our steelmakers face a huge challenge, and most if not all are being propped up by the Government. In response to the suggestion of the noble Lord, Lord Hannan, that we kick those props down and see what happens, I think we know what would happen if the Government did not act as they are and had not acted as they did. On the future ownership structure, we heard from the Government—from Jonathan Reynolds—that they would like a sector partner going forward. Yet with honourable exceptions such as Tata, past experience has shown that the sort of businesses willing to take on the mantle of a partner are often ones that fail to come up with the capital model or to do what needs to be done. That will be a challenge for our new Investment Minister, and it would be useful to understand how he and his department will go about finding that sector partner and where they might look. All this begs a question that each of you in many ways has probed: what is the future purpose of steel in Britain, and what will the strategy seek to make happen to deliver that future shape? The Government closed their consultation more than six months ago but have yet to present any outputs relating to strategy. June’s industrial strategy and the corresponding August advanced manufacturing sector plan referenced steel as an important industry but committed only to a future steel strategy. That provides no certainty or clarity for a sector that desperately needs things to cling on to. I think there is, on paper, a Steel Council. Can the Minister tell us how many times it has met, whether it has reviewed a draft of the steel strategy and whether it has approved the strategy? Where will the strategy be signed off: by the Secretary of State, the Prime Minister or the Treasury? More than that, when it is eventually launched, how will the strategy be implemented? It is in implementation of strategy that we find so many shortfalls. With steel we have seen something interesting: there was necessary frenetic activity in the run-up to the Government stepping in. There were dramatic tales of actions taken under the cover of darkness, if not by Johnny Reynolds then by some of his colleagues, to secure the future of the blast furnace. That is great—but there has not been much of a narrative since then. What is actually happening? Moving on, I have more questions. Where are the Government in their negotiations with Jingye? The Minister painted a slightly rosy picture of their relationship with Jingye, which I find interesting and perhaps hard to understand. In my understanding, Jingye is seeking many hundreds of millions of pounds in compensation for what the Government have done. Have they ruled out handing any public money to Jingye, or is it just a matter of how much and when? If they agree to pay it any money, where will that money come from? Will it come from the steel rescue plan or from a separate Treasury fund? That steel rescue money is already in demand. As we have heard, £500 million has gone to Tata towards the installation of the electric arc furnaces, but in Scunthorpe costs are being incurred too. As the Minister said, £270 million has been provided, ostensibly for working capital and things such as raw material. But there will be ongoing costs, and it would be helpful to understand, given that the £270 million is a downpayment, the likely monthly ongoing cost that will be drawing down from the steel fund. Looking forward, having saved the furnaces, the Government need to determine how that can ever be cost effective. That really relates to much of what we have heard already. In September 2024, Jonathan Reynolds told the House of Commons that the Government’s preferred option was a transition plan in Scunthorpe to more electric arc furnaces. If they started now, we would not have an arc furnace there until 2030. How is the blast furnace to arc furnace transition in Scunthorpe ever to be financed, and indeed be financeable? In the short term, internal markets have been identified for the product in Scunthorpe, but most of those markets are things that have not happened, are not happening and may happen some time into the future. The whole structure of the market for Scunthorpe is not there. Given that the cost of Chinese and other steel is substantially cheaper for most of the sort of steel that has been identified for Scunthorpe, again, how do the Government square the circle on costs while maintaining what they want to do? I will not go into energy costs, because your Lordships have done it so well, except to say that there are ways of reducing the cost of electricity by delinking it from the cost of gas—our leader, Ed Davey, has been very clear and detailed on that. That would be a start for the industry. The steel industry has stood as a great pillar of British industrial strength, but we have had historical decline, policy drift, mismanagement, bad commercial marriages and external market pressures, which have put us, frankly, at the point of near-extinction. Perhaps it is the best of all possible worlds, unless we understand what the optimal activity is and what the optimal scale for that activity is across the country. That is what we are waiting for in the strategy. We have to decide what we are going to do, and it certainly is not doing everything everywhere. I ask the Ministers to take on board the absolute necessity to be focused in what we do. This is an important industry; it is one that we value, but one that we need to target and focus. It is quite clear that we cannot remain where we are now. We need to know where we are going—and very soon.