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Regional Economy (Tackling the Recession)

I was grateful for Ray Mallon’s amiable welcome. I am glad to be in this wonderful town hall and I welcome you—and your mobile phone—to the Chair, Mr. Cook. I also compliment my right hon. Friend the Minister for the North East on his leadership during his tenure of office, and on his excellent speech this morning. I was proud to be appointed, along with my hon. Friend the Member for City of Durham—she would have had a great deal to say today but has unfortunately been cut out by the time limit—an assistant regional Minister at a time when an extra hand to the pump and another eye on our industrial future were needed. Happily, I have two of each. The right hon. Member for Berwick-upon-Tweed is right: we must retain the spending and the fiscal stimulus to see us through properly into the upturn. My hon. Friend the Member for Blaydon is right, too: history makes it very clear that the only people who will ensure that we get our share of that spending in the north-east are a Labour Government. Redcar steelworks has been geared to export since 2004. The internal structure of Corus was such that it no longer wanted to take our steel from that time on. So well did our excellent mill do that we obtained a 10-year contract for a consortium of foreign purchasers to take everything that we could make. Over the four years that the 10-year contract lasted, it was not a steel mill, it was a gold mill for the purchasers. They made an estimated £700 or £800 million—a considerable profit—because we were able to price our work so competitively that it was well below the market price on many occasions, and we stuck with the contract notwithstanding that. Of course, if we had left the contract, we could have sold at the market price, and that £700 or £800 million would have been our profit. Sadly, almost on the day, it seemed, that our contract price rose and the market price dropped, the consortium walked away. One can imagine the impact that that had on Redcar and the surrounding area; one minute ships were exporting steel as fast as they could and the next day, almost literally, the room was empty and one could only have thrown the steel in the sea. Gone. When the market price was so low that we could not compete, almost all there was to do was consult on closure and redundancy, but plan A had to be getting the consortium back, if at all possible; the whole steel mill was geared to supplying its needs. We tried. I went to Italy myself and spoke to Mr. Marcegaglia. He gave me a large chunk of parmesan cheese to bring back, but unfortunately did not give me the steel contract that I had gone to get, which will be a matter for the courts to sort out. However, he came back and talked to Corus. The Corus workers and management are so flexible that they had been pursuing other customers at the same time and the price started to go up. I want to pay tribute to Jon Bolton, the excellent CEO at the mill, and to Geoff Waterfield, who organised the union so well. They fight their corners but co-operate when they need to. Happily, the market price has gone up again and we have been able to bring our costs down. There are synergies at that steel plant, which is what is so good about it. It is flexible. One Chinese steel plant a week online can be brought on line, as I understand is happening now, but it will not have the engineering experience and good labour relations to offer what we can offer. Make no mistake, our steelworks is capable, in most situations, of being profitable. Corus internal orders sustained us after the consortium left, and we are grateful to Corus and Tata, who have made clear, by that action alone, how much they are behind the plant. We have export orders again. We are in the competitive price range and have export orders from a group of mostly Asian purchasers, all of whom are interested in perhaps bidding to buy the plant, as the first consortium were. Obviously, cost is absolutely critical. The Government have contributed £5 million for training. I expect the local Labour council to cut the business rates or to defer them for many months imminently. We have written, as local MPs, to ask for, and have got, public procurement in construction advanced so that steel can be bought internally as well. It is clear that we have to compete, which we can do because of the steadying price and other capacities coming on stream in Europe. We are still in a highly competitive position. We are not necessarily over the hump, but we feel positive and I want to give that message. The loss of the consortium was a shock and a lesson in not putting all one’s eggs in one basket; we do not do that in Redcar, we have the Wilton Group as well. That is another story, which there is not time to tell, but it is not a hopeless case either. We realised, looking at the steel industry, that we were not diverse enough, although the north-east economy is more diverse than it used to be. We have a lot of things on stream that will help in future. Cyclical as the chemical and steel industries are—not usually as dramatically as now—they can be buttressed by other things. Biomass and carbon capture and storage power stations are proposed. There is a proposal to use some of the last riverfront land to de-engineer oil rigs. That would be 30 years of skilled work for our people. There is a plan for a heavy oil upgrader, which would take the non-commercial dark dirty oil out of the North sea oil wells and refine it to become bubbling gold. There is third-party business now at the steel wharf, and there is the Ensus biofuels plan, which my hon. Friend the Member for Stockton, South has referred to. There is a low-density polyethylene plant—that is a long set of words—which will soon come on and buttress the cracker, which is the biggest chemical plant at Wilton. Also, with luck, presently there will be a recycling plant. What is going to get us through this is all the investment, with the Labour Government, industrialists, management, unions, the local newspaper and the Save our Steel campaign all working together. We will come through. We were the seat of the first industrial revolution, and it is north-eastern people who made that a great success. We will come through this crisis. We will succeed, and it will be the flexibility, resilience and calibre of the north-eastern people, whom we are all proud to serve, that will ensure that we come through.