PARLIAMENTARY DEBATE
Port Talbot Transition Project - 11 September 2024 (Commons/Commons Chamber)

With your permission, Mr Speaker, I would like to update the House on the improved deal that this Labour Government have secured for the workers of Tata Steel, specifically as it relates to its plant in Port Talbot. As well as setting out the details of this improved deal, I am also announcing today our ambition for a new UK-wide steel strategy—one that equips our steelmaking industry with the right support not just to adapt but to thrive in the new green economy. But before I do so, I want to address the situation we have inherited.

Since becoming Secretary of State two months ago, I have had to respond to a series of challenges, not just with the steel industry but in shipping—such as at Harland & Wolff—and in other areas where the previous Government had simply ceased to make decisions and decided to leave them for us to deal with. That was a dereliction of duty and it has left the steel industry in particular in an extremely perilous position. The previous Government had been promising a plan for the steel industry for years. With what I am able to announce today—with the signing of a legally binding deal that enables Tata to order its electric arc furnace as part of a significantly improved package—this Government have made more progress in two months than they made over the previous Parliament. But if we had started these negotiations even a year ago—never mind years ago as they had the opportunity to do—I have no doubt that we would have secured an even better deal for the community.

So I start with an apology to the people of Port Talbot, because they were let down by the previous Government. While this deal is much improved, I acknowledge that it falls short of what would be my ideal. I have, however, been to Port Talbot several times and met the workforce there, along with the reps and the generations of families who have literally forged Port Talbot as we know it. That is why, when Tata first announced that it would be closing the blast furnaces, resulting in some 2,800 job losses, I knew that the workforce deserved so much better. I warned my predecessor not to proceed with what they had negotiated. Why? Because I was confident that the Government could secure a better deal: a better deal for Tata’s workers and a better deal for the people of Port Talbot. And I am able to announce today that this Government have secured that better deal, but I reiterate that if we had had the opportunity that the previous Government had over so many years we could have done more.

The key features are as follows. First, we have agreed a process with Tata to assess investment opportunities for new, additional capabilities that will deliver more secure, long-term jobs than the deal we inherited. This is on top of the plans for the instalment of the electric arc furnace. We have agreed a process with Tata to take this forward, and I will report back to the House on that progress. But this is the most important element, so I am announcing the deal now, rather than after the process is complete, because for Tata to secure the build slot for the electric arc furnace, that element needs to be sorted now. Further delays would put the whole project at risk and could lead to a much worse outcome.

Secondly, in every conversation I have had with Tata’s directors, I have stressed the need to avoid compulsory redundancies wherever possible. I have asked them to channel their efforts instead into job matching and retraining so that the steelworkers of Port Talbot, who have dedicated so much to the industry in the past, can now help shape its future as they will be able to transition and move within the business. As well as that, Tata is agreeing to offer a comprehensive training programme for any employee as an alternative for those at risk of compulsory redundancy. This would be on full pay for one month, then £27,000 a year per employee for 11 months. Tata will fund all those costs. Employees will be able to choose from recognised qualifications to develop sought-after skills that will be in high demand in the local economy now and long into the future. We know, too, that Tata expects that during the construction of the electric arc furnace at least 500 new jobs could be created, which will tap into the local labour market wherever possible.

Thirdly, where we cannot secure new jobs or training, working closely with the unions we have helped to secure improved terms on redundancies. Tata’s employees are now able to express an interest in the most generous voluntary redundancy package the company has ever offered for a restructuring of this size. Employees will now be paid 2.8 weeks of earnings for each year of service up to a maximum of 25 years. At the same time, we are ensuring that there is a minimum redundancy payment—£15,000 pro rata—and a retention payment of £5,000 for employees leaving the business because of these closures. Over 2,000 members of staff have expressed an interest in voluntary redundancy who will be eligible on these terms.

Fourthly, as part of the deal the company will also be releasing 385 acres of its site for sale or transfer. This is valuable real estate which will help bring in more companies and more employers not just from the steel sector but from a whole host of other industries too, helping to diversify the workforce at Port Talbot.

While Conservative Members told us that there was no alternative to the original proposal, we knew that there was, and we have bargained hard for it. And we are putting in watertight conditions within our grant funding agreement for job guarantees to claw back investment if these jobs do not materialise. For example, there is now an improved grant repayment of £40,000 for every job that is not retained post transformation. This money will be repaid directly to the Government and is a powerful incentive for Tata to deliver the 5,000 UK jobs target.

But our ambition for steel is so much bigger and broader than one single company: it is about the whole sector. The UK has always been a proud steelmaking nation, with a rich heritage stretching back to the industrial revolution. From cars to cranes to ships and scaffolding, British steel has been, and is still, used the world over, embodying our industrial might and innovation. Yet for years steel has been a neglected industry in this country. Crude steel production has declined by more than 50% in the last 10 years. Indeed, some proclaimed the industry’s decline would be inevitable in the 21st century—that it was somehow a sunset industry—but those people are wrong: we on this side of the House have never believed that decline is inevitable and while the industry faces challenges today we want to do everything we can to ensure that it can adapt and grow tomorrow.

That is why I am pleased to announce that we will introduce our new steel strategy. As hon. Members know, our manifesto included plans to make available £2.5 billion for steel, on top of the £500 million transformation of Port Talbot. Our intention is to increase our UK capabilities, something the previous Government never attempted, so that we can create a more vibrant and competitive steel sector in the UK.

As part of our steel strategy, this Government will look seriously at options to improve steel capabilities across the supply chain, including in primary steelmaking. We are clear that we cannot prioritise short-term subsidies over long-term jobs, which is why, with the help of independent experts, we will review the viability of technologies for production of primary steel, possibly including direct reduced iron.

Steel is essential to delivering on our net zero goals and building the next generation of green infrastructure, and I know that Labour Members are passionate about that. That is why, under our steel strategy, we intend to use the Procurement Act 2023 to drive economic growth and account for social value in the things that the Government buy and the projects we commission. Work is already under way to increase the role of steel as we build our manufacturing base.

We recognise that, for far too long, Britain’s energy-intensive industries, including the steel sector, have been held back by high electricity costs. More often than not, this has made the UK less attractive to international investors, but we will take action on that. Our clean energy mission will ensure that we are no longer exposed to the kinds of gas price shocks that we have seen in recent years, and that will help British businesses to compete and win in the global market. In support of that ambition, we are working with like-minded nations to tackle global trade distortions, including through our chairing of the global forum on steel excess capacity this year.

Our steel strategy will be developed and delivered in partnership with the steel sector and trade unions, and it will work in lockstep with the Government’s industrial strategy, which will set out our ambition to ramp up investment, strengthen our supply chains and create more well-paid jobs in the places where they are needed most. In order to drive forward our partnership on the steel strategy, I will shortly meet industry experts and interested parties for discussion on the industry’s future. We intend to publish the steel strategy in the spring of next year.

The Government care about steel and the communities it supports, and recognise steel’s fundamental importance to the economy. Supporting steel in this country is about being involved in the detail and shepherding individual plants into the future while protecting the people in them, but it is also about providing a direction of travel, an inspiration for investment and a cause for confidence, so that the sector can play its part in the next 10 years and beyond.

We are not naive about the scale of the challenge before us. Although the situation is still challenging, this is a better deal for Port Talbot than was on the table, and it is the maximum improvement we could make in two months. It represents a better destination and a better transition to the bright future that steel will have under this Government. I commend the statement to the House.

I have been a Member of Parliament for 14 years, in which I have seen some interesting political events, but I do not think I have ever heard a contribution with such brass neck. That is quite something, because there is quite a menu to choose from.

Let me explain what I was doing during polling week, in the lead up to 4 July. Parliament was not sitting, and I was shadow Secretary of State. I was going between key seats, as would be expected, negotiating with unions, Tata, my colleagues in the Welsh Government and every relevant body to prevent action that would have resulted in the entire closure of the Port Talbot works on polling day. It was as though the Government had already gone; they were not on the pitch. The first thing I had to do, before I even became Secretary of State, was ensure that there was something there to save, because it would have gone under the Conservative party. [Interruption.] Conservative Members really need to listen, because my contributions are factually accurate, and I will help them to understand the real situation.

The point of the new investment is to save jobs. There will be better terms for the people who are unable to get the new jobs, including better cushioning during their retraining for entry into the rest of the economy. I have explained why it is a better deal, as I hope the shadow Minister has seen. He mentioned media reports; they have not come from my Department, but I appreciate that there were lots of interested parties. The unions and the Welsh Labour Government recognise that this is a better deal. I hope that the Conservative party recognises, on taking a step back from the statement, why the deal will make such a difference.

The shadow Minister mentioned virgin steel. Let me talk about my frustration about that. He will understand that the two blast furnace sites, Scunthorpe and Port Talbot, lose a great deal of money every day. The managers are so fed up with the lack of action under the last Government that they have put timescales on their closure. The simple truth is that I do not have the timeframe that was available to the Conservative party. Moreover, when it comes to Scunthorpe, I do not yet have the carbon capture infrastructure in place that will be necessary for the ideal solution. I would love to be a position to look at the hybrid solution that the shadow Minister put forward—keeping the blast furnaces open while we bring the electric arc furnaces online—but all the time that could have been used to work on that was during the Conservative Government, and they did not do that work. There are therefore far fewer options available to us, and the situation is far more challenging.

Since I became Secretary of State, I have had many meetings with the UK management about Scunthorpe, and have had three meetings, I believe, with Mr Li, the principal shareholder. I also met him when I was shadow Secretary of State. We have been clear that we want a transition in Scunthorpe, and want to put up Government money alongside what the company may offer, but that has to be part of a transition to the future. The workforce and the route that is offered to them has to be part of that.

Even if we are successful in doing that, my frustration is that the options available are very difficult for the area. The solution I would ideally deliver, which could have been delivered by the Conservatives in those 14 long years, is not available. When Conservative Members leave the Chamber today, I hope they reflect on the mistakes they made, their lack of action, the legacy they bequeathed us and, fundamentally, the improvements we have been able to make in such a short time.

My right hon. Friend is absolutely right. We are not just seeking to deliver new, improved transition deals for the key sites, but want to improve the overall business and investor environment for steel in the UK. I believe that can be done. The kind of investments in core capacities that we are thinking about could be very successful in the United Kingdom. Obviously, two months is insufficient for the due diligence that is required on some of the elaborate and considered business cases necessary, but the process is about delivering that. We can turn this into an extremely positive story for UK steel.

I very much welcome the hon. Member’s words and her recognition of the improvements that we have made with this deal. Fundamentally, we have recognised the need for a better business environment, moving away from relatively short-term responses to that much better, more secure long-term framework. She will understand that the significant increase in investment that this new Government are willing to make can make a substantial difference. However, the emphasis must be on long-term investments for the future, so that we can secure those long-term secure jobs. There are several different ways that we can do that. I absolutely agree that our method should be aligned with the industrial strategy, and we will be able to make some announcements on that in the near future, leading up to the launch of the steel strategy next year.

I am grateful to my hon. Friend for his question and to you, Mr Speaker, for your very skilful introduction. He is right to talk about that wider business environment, and specifically asks about the carbon border adjustment mechanism. We have inherited this situation of the UK being out of line with the EU. Obviously, because our carbon prices are lower, there is a potential carbon barrier to UK exports to the single market. I can tell him that we are looking at that. The carbon border adjustment mechanism is a key part of a wider policy environment that must deliver decarbonisation, which is not deindustrialisation. We must recognise that the current policy environment is not doing that in the way that any of us would want.

I am grateful to the right hon. Member for her questions. We will see the strategy in spring next year and the resources behind it, including the existing Government allocation for Port Talbot and the new money that the Government will put in. It is a £3 billion clean steel fund, so it is a significant investment. Obviously, I want a certain amount of return from that. I want to work with private sector partners. The kind of capital expenditure that is involved in the transition to green steel requires very significant partners who can deliver. It is not just a question of the Government doing this alone, and I think hon. Members recognise that. Steel safeguards are important. The right hon. Lady will know that steel is a significant part of the existing Trade Remedies Authority protections, many of which relate to China, but not exclusively so, and we keep them under regular review.

I thank my hon. Friend very much for her question. Let me say again that I wish that we were in a position to do even more, but I can tell hon. Members that this is the maximum improvement that was possible within two months. I know that in constituencies such as my hon. Friend’s people are seeking more than anything else a recognition that steel is not a sunset industry. It is vital to the future; it is not the case that it should be in inevitable decline in the UK. Indeed, we are an outlier in terms of the size of our steel industry among comparable G7 and OECD countries. This could be and should be a very positive story, and I am honestly confident that we can deliver that in future.

I am grateful to the hon. Member for his question and very much agree with him. As the shadow Secretary of State, I avidly read the statistics that the Department published about UK content in domestic steel procurement. We must recognise that it is usually relatively high, but only in the sectors where we are producing particular grades of steel. Part of the strategy has to look at future demand, not just for what we already produce, but in terms of gaps and business opportunities. If we are improving the business environment, we need not just to help incumbent producers in the United Kingdom transition, but bring in new entrants, creating more competition in the market. I can see that there is significant demand in the market. It is the market that is driving the demand for green steel. I have no concerns about the future order book; it is the business environment taking advantage of that demand that this strategy needs to address.

I thank my hon. Friend for his question and for recently visiting the site to speak to management and the workforce. He is right about the understandable level of concern in the workforce. Obviously, that is often speculated on in the media, and there is a huge amount of interest in it. I made this statement today because of the need to proceed with part of the plan, and not to lose everything entirely. I also wanted to be able to answer questions such as his and to make it clear that the Government’s manifesto commitment to the steel transition fund forms part of a wider ambition, a coherent strategy, for the future of steel across every part of the UK.

The levels of ambition and resource that we have as a new Government are actually greater than the figures that the hon. Lady has just given. To do the work that she describes requires a private sector partner. The Government cannot alone meet the capital expenditure needs. Indeed, to be successful it is better to work with a private sector partner to deliver that. Having a partner to retain virgin steel production is part of what the strategy will be able to address. If I had a partner willing to keep blast furnaces open, I would be very interested in that. However, I do not want to spend this very large sum of money in our clean steel fund on subsidising operating losses for one or two years, which would eat up most of that £3 billion and leave us with nothing at the end of it. I want to co-invest with the private sector for good, secure, long-term jobs, which are much in demand. She is right to say that other European countries have been way ahead of the UK in the past few years, but the level of ambition from this Government not only matches that among some of those European competitors but exceeds it.

The answer is a great many, as my hon. Friend will understand. I have always been conscious not just of the specific impact on the workforce at Port Talbot, but of the fact that some of the big industrial transitions of the past in the United Kingdom, in the north-east of England where I grew up, were not handled well. I think people recognise that. I thought that the previous Government’s levelling-up strategy was a recognition of the long-term damage that was done in the late ’80s and early ’90s by that transition. Getting that right, and showing the workforce that this is a Government who care, have always been paramount. I have been to Port Talbot several times. I last met the community reps a week ago, and was able to have frank conversations with them. In everything that I have said, and will continue to say, I recognise that we wish that we were in a position to do more, but within the parameters of what we had and where we almost were, in terms of the entire loss of the site, I am confident that this is the biggest improvement that was possible in two months. We will always work with them to ensure that we are getting everything that we can for the site.

The right hon. Gentleman will know that this has long been a campaigning issue of mine. I have talked repeatedly about the relationship between decarbonisation and the potential for deindustrialisation, and the policy environment in this country not being fit for purpose to deliver that. On the wholesale electricity prices of energy-intensive industries, for most of the time under the previous Government the UK’s prices were wildly uncompetitive. There was some movement, as he knows, with the supercharger policy near the end. More can be done, and there is an even more exciting longer-term position that we could get to. He will have to wait for the Budget, and maybe the spending review, for some more detail on that, but this issue has to be an essential priority for the competitiveness of the UK. We have to recognise that a lot of the industries that we will transition to are very heavy users of electricity—not just clean steel, but for instance gigafactories. This will be a key tool in the future that we have to do better on than we have in the past 14 years.

I thank my hon. Friend for all his support during our years in opposition, when we tackled many of these issues. He asks about procurement. Of course, anything that we do as a Government will be consistent with international trade rules and our commitment to open markets and multilateralism. There is a legitimate way in which social value can be considered in Government procurement. Given the value and quality of what we produce in the UK, I am very confident in procurement playing a bigger part in the future of the steel industry. On defence and the blast furnaces, he will know that neither Scunthorpe nor Port Talbot plays a direct role in some of the key Ministry of Defence contracts. Sheffield Forgemasters plays more of a role in that. There are more capacities and capabilities that we can look to as a country for opportunities in the future.

I am afraid that the hon. Member is misinformed as to what this is about. The issue is that these sites lose approximately £1 million a day. They have done so for a long time, and the owners are fed up and want to know that there will be a plan for the future. The role of the Government is to make that future better than it would otherwise be were we not on the pitch delivering it. There are issues around the competitive cost of industrial electricity in the UK, but they are not the issues that he says.

On the guarantee that he seeks, he will have heard my statement. The contractual terms of the grant funding arrangement include that clawback capacity, not just for the overall project but even down to the number of jobs retained. Those are the kind of job guarantees that I want in the public-private relationship going forward.

My hon. Friend is right to make that point. We cannot say enough that this is not a sunset industry; it should have a bright future. We can get this right. On the negotiations, my hon. Friend will know what I have already said about the conversations with British Steel. It is a very challenging issue. We have made it clear that the Government are there to play a part, and we obviously want that to be part of a transition. We have made that as clear as can be. As soon as I have further information, I will update the House.

I welcome the hon. Gentleman’s support for industrial strategy. I have said many times that there should be, as there is in many countries, cross-party agreement—perhaps not on the detail, but on the premise and what we are trying to achieve. He asks about domestic manufacture and the blast furnaces remaining open. That is of course my preference, but I need a business partner—a company that is willing to do that. I do not think that it would be reasonable to spend the very considerable sum of money that we have pledged on subsidising short-term losses rather than on the ability to deliver new things. He also asks about coking coal. Obviously, that depends on the long-term future of the blast furnaces. That is what they need.

In relation to British Steel, I want a transition plan. My comments earlier were about my frustration that, for me, the ideal deal in a place like Scunthorpe would have been to build the future alongside operating what we currently have. That was available to the last Government; they did not proceed with it. The kind of infrastructure needed for the long-term future of operating blast furnaces would require carbon capture and storage. It was cancelled many times by the previous Government, and is not there. I am heavily constrained in my options, but I am still doing everything that I can to get a deal for the workforce, and to ensure that there is a business there that commands the support of its customers to transition in the future.

There are future opportunities, particularly from renewables, some of the steels that will be necessary in the automotive sector, and some of the new technologies that are being taken up around other European countries. There is particular excitement about direct reduced iron. How we deliver the business environment, hopefully with new and existing partners, is absolutely key. I hope that that is what the strategy will deliver.

I say again that had the election not been called, a statement such as this would not have been not possible. It would have passed us by; that was the situation that we faced. My hon. Friend rightly talks with pride about her constituents at Llanwern, which is an incredibly important and successful part of the industrial supply chain in the United Kingdom. I will ensure, as part of the transition, that the downstream functions, which are so valuable and praised, and which carry such respect in the industry, are protected, and that the transition plan does not disrupt the business model, which is, again, proof of the sector’s success and of future opportunities.

I am extremely grateful to the hon. Member for his support for what we have announced. Having a competitive environment is an absolutely key issue. I am already having extensive conversations with the Chancellor and key Cabinet colleagues, including the Secretary of State for Energy Security and Net Zero, about the way to do that not just in the short term but in the longer term, when we will clearly have a significant renewable energy base. There are a lot of exciting options available, including in how we use some of that capacity in areas of low consumer demand. I can tell him that that is a key priority for getting this right in future.

I am grateful to my hon. Friend. Although I know that the workforce has, at times, been frustrated by Tata’s plans, I understand why Tata itself was frustrated by the previous Government and how long it took to do the deal. In opposition, I had extensive conversations with Tata to build the kind of relationship that has been necessary to deliver something like this. I met executive chair Chandra at Davos and then flew to Mumbai, as colleagues may remember, to build that relationship. I also saw him yesterday, alongside the Prime Minister and the Chancellor, because he was in the United Kingdom. We are continuing those conversations and working with all partners to deliver the kind of opportunities that we think will be available in the UK in future.