Contribution
My Lords, I thank the Minister for the Statement and welcome that there is a strategy here, although, as the noble Lord, Lord Sharpe, said, we were expecting it for some time. However, given what is happening in the world, reading this document conjures the image of someone trying to put up a tent in a howling blizzard, and at the heart of the blizzard are the energy market ructions caused by the Iran conflict.
The UK’s industrial energy costs were already at least twice those of the EU and four times those of the USA. The noble Lord, Lord Sharpe, and I have different multiples, but they are all very large. It is not clear to me whether these distortions that are already there in the UK energy pricing system will increase the gap as a result of the Iran issue as it bites. I doubt the gaps will narrow.
As the strategy sets out, the British industry supercharger scheme helps those companies that benefit from it. However, the steel industry comprises very many businesses, large and small, that do not qualify for the supercharger, although some may qualify for the British industrial competitiveness scheme—BICS. Can the Minister say how many steel-related businesses will benefit from BICS? However, BICS does not kick in until 2027. Given what is happening internationally, will the Minister undertake to speak with her Treasury colleagues about bringing forward the implementation of BICS? In any case, we should note that while the supercharger scheme exempts recipients from network charges, BICS does not, and those network charges are set to increase by a staggering 60%.
These are just a few of the reasons why, unless the Government revisit the energy costs issue, the steel strategy will quite simply be blown away.
Among the more eye-catching and concerning parts of the strategy are the new trade measures to introduce tariff-rate quotas and the possibility of, in future, raising most favoured nation—MFN—applied tariffs to 50%. Late last year, the Trade Remedies Authority ran its rule over imports of rebar from Vietnam and made recommendations to the Secretary of State. This was an entirely appropriate use of that body; indeed, it is what the body was created to do. Having worked on the Trade Act, which established the TRA, at the start of this decade, I see that it clearly has an important role, particularly given the wider scope of the potential actions set out in the strategy. But I do not see any reference in the strategy to the role of the TRA. Have the Government asked the TRA for its recommendations? When could we expect its report? It seems inappropriate to act without that authority.
Next, in his answer to questions in the Commons, the Secretary of State confirmed that there has been discussion with his EU counterparts and that the discussion would continue when they meet at the WTO. Can the Minister confirm that for the purposes of these discussions, steel’s treatment in the TCA—the trade and co-operation agreement with the EU—is equivalent to its treatment in an FTA; in other words, from a WTO perspective, is the TCA equal to an FTA? Furthermore, can the Minister say how, for the purposes of these discussions, the Government are treating the MoU with the USA regarding steel? I assume it does not have the status of an FTA, so how will this modify what we can legally do under the WTO with the United States?
I turn to the local impact of this strategy, which means that there remain question marks for a lot of our communities. My honourable friend in the Commons, David Chadwick MP, spoke very forcefully about the importance of steel to Wales and its economy. He also reinforced the need for faster action in ensuring that the electricity used, for example, to power the arc furnaces is green energy. I strongly commend his comments.
In geographical terms, I would like to highlight the South Yorkshire area, including Sheffield, where there is a host of important steel businesses. It is not just down to the headline firms; there are many other important businesses further down the supply chain that make up this vital steel ecosystem. These kinds of ecosystems are echoed all over the country. The Statement says the defence growth deal will be established in five areas, including South Yorkshire, as part of the defence industrial strategy. Can the Minister tell us when full details will be published? When will a defence growth deal be operational?
To support the effectiveness of a growth deal, a colleague of mine from Sheffield Council, with a strong steel background, suggests that a defence manufacturing supply chain database be built to include the hundreds of thousands of smaller tier 2 and tier 3 suppliers that are critical to our sovereign capability. In this way, the whole sector can be explicitly brought into the realm of the defence growth deal. Noble Lords will be surprised, I think, to know that there is no such survey and no such data available.
I was able to see how the Aerospace Growth Partnership worked effectively with its supply chain, and perhaps the Minister might like to look at how that operated and try to put the same principles into practice for steel. We on these Benches share the Government’s ambitions for a robust and growing steel sector, and we believe that this strategy makes some steps in the right direction. However, the already significant headwinds just got a whole lot worse. That is why success will depend on further action on energy, clarity on tariffs and a truly inclusive growth strategy.