Steel Industry (Nationalisation) Bill

Second Reading

17:16:00

Moved by

Lord LeongThat the Bill be now read a second time. Northern Ireland , Scottish and Welsh legislative consent sought .

The Parliamentary Under-Secretary of State, Department for Business and Trade (Lord Leong) (Lab): My Lords, steel is a historic British industry at the heart of our national story. For generations, steelworkers have forged not only steel but Britain’s prosperity. From Scunthorpe to Sheffield, from Port Talbot to Teesside, steel communities have powered our industrial success, strengthened our economy and contributed immeasurably to our national life. For those communities, steel is far more than an industry; it is a source of pride, identity and opportunity. It is a way of life, built over generations through skill, dedication and enterprise.

However, steel is not only about our past; it is fundamental to our future. Steel underpins our infra- structure, manufacturing base, energy networks and transport system. It is essential to the homes, railways and power stations that we build and the defence capabilities on which our national security depends. Steel is therefore not merely another sector of the economy; it is a strategic national asset. Its future is central to our economic resilience, our industrial strength and our ability to deliver the growth and prosperity that this country needs.

The global steel industry faces profound challenges. The volatile geopolitical climate, intensifying international competition and significant global overcapacity have placed enormous pressure on steel producers worldwide. British producers face those challenges while contending with energy costs that remain higher than those of most of their many international competitors. Recent events have highlighted the fragility of global supply chains. The pandemic exposed vulnerabilities that many had assumed did not exist. Russia’s invasion of Ukraine reminded us that economic and national security are inseparable. Increasing geopolitical uncertainty has underscored the importance of maintaining domestic industrial capability.

The lesson is cleara modern industrial nation cannot afford to lose the capability to produce the materials on which its economy and security depend. Without intervention, the United Kingdom faces the prospect of being the only G7 nation unable to produce virgin steel from raw materials within its borders. That would be more than an industrial failure; it would represent a strategic vulnerability. That is why in March the Government published The UK Steel Strategy , setting out a commitment to revitalise the steel sector, restore domestic production to sustainable levels and secure the industry’s long-term future.

The strategy recognises that the Government have a vital role to play. It means tackling the drivers of high operating costs, including reducing industrial energy costs. It means maintaining a robust trade defence regime to protect British producers from unfair competition. It means working alongside industry to secure the investment that is needed to modernise and decarbonise steel production. It means ensuring that where strategically important steel-making assets are at risk, government has the tools necessary to act decisively in the national interest.

That brings me to the Bill before the House today. This Bill establishes a framework that enables the Government, where necessary and justified by the public interest, to bring steel undertakings into public ownership. This is an enabling measure. It provides the Government with the ability to intervene where strategic domestic steel-making capability is at risk and where such intervention is necessary to safeguard the national interest. As the Prime Minister has already made clear, the Government are strongly minded to use these powers in relation to British Steel, subject, of course, to the public interest test set out in the legislation. The circumstances surrounding British Steel and the Scunthorpe steelworks are well-known to the House. Scunthorpe is the last remaining primary steel-making capability in the United Kingdom. It directly employs approximately 2,700 highly skilled workers and supports many thousands of additional jobs throughout the wider supply chain. The Government took decisive action last year under the Steel Industry (Special Measures) Act 2025 to prevent the premature and disorderly closure of the blast furnaces at Scunthorpe. I would like to place on record my gratitude to noble Lords across the House for their constructive and responsible engagement with that legislation. I pay tribute to the parliamentary staff whose efforts enabled Parliament to respond swiftly to an urgent national challenge.

The measures enacted last year served their immediate purpose. They prevented closure and ensured continued production. However, those powers were always intended to be temporary. Although they have enabled continued operation, they do not provide the flexibility required to undertake the longer-term restructuring, investment and modernisation that the business now requires. As matters stand, the Government believe that public ownership offers the most effective way to secure the company’s future and to enable strategic decisions to be taken in the long-term interests of the business, its workforce and the nation.

However, I emphasise that any decision to nationalise remains subject to the public interest test as set out in the Bill. The Government did not reach this position lightly. We engaged constructively and extensively with Jingye to pursue a commercial solution. Our clear preference was to secure the future of steel-making through agreement rather than through intervention. However, despite extensive negotiations, it has proved impossible to reach an agreement that would represent a responsible and proportionate use of taxpayers’ money. In those circumstances, the Government concluded that legislation was necessary.

Some noble Lords may reasonably ask whether nationalisation is the right answer. The Government’s response is straightforward. Nationalisation is not an ideological aim and it is not the first option either. It is a pragmatic tool available for use when the national interest requires it. The costs of losing our steel-making capability would far outweigh the costs of preserving it. Once blast furnaces are extinguished, once supply chains disperse and once specialist skills are lost, rebuilding those capabilities becomes extraordinarily difficult and expensive. Inaction carries consequences and dependency carries risks. The loss of sovereign industrial capability carries costs that cannot be easily measured in purely financial terms. That is why Governments around the world intervene to protect strategically important industries. Britain should be no different.

We believe that British Steel can succeed. With the right leadership, investment and long-term strategy, the company can be transformed. We have already seen the success of public ownership in the case of Sheffield Forgemasters. Recently, British Steel has secured important new contracts, including supplying rail infrastructure and supporting future energy projects. These are encouraging signs of the opportunities ahead. Turning to the detail of the Bill, I recognise that it contains significant powers and that noble Lords will wish to scrutinise them closely. That scrutiny is both expected and welcome. The Government have consistently sought to ensure that the powers contained in the Bill are proportionate, necessary and appropriately constrained.

Lord Redwood (Con)On a point of information—

Lord Fox (LD)We do not do points of information at Second Reading.

Lord Leong (Lab)I will continue. In developing this legislation, we have drawn heavily on the framework established by the Banking Act 2009, adapting well-established precedents, rather than creating entirely new mechanisms. The principal transfer powers are subject to a sunset clause and will expire two years after Royal Assent. This ensures that they remain in force only for as long as necessary to achieve their intended purpose. The Bill provides for compensation arrangements when powers are exercised. Compensation will be assessed independently, by a valuer appointed through an independent process. This ensures fairness, impartiality and proper protection for affected parties. The Government are committed to treating all investors fairly and consistently.

Many of the technical provisions contained within the Bill are designed to ensure that any transfer of ownership can be carried out smoothly and effectively. In practice, we are seeking through legislation to replicate many of the outcomes that would normally be achieved through a complex commercial transaction. That inevitably requires powers to address legal and operational issues arising from such transfers and to ensure continuity of operations. These powers are not novel; they follow established legislative precedent, and are solely intended to ensure that the legislation’s objectives can be achieved effectively.

The Bill is ultimately about the kind of country that we aspire to be. Do we believe that Britain should continue to produce the steel upon which modern economies depend? Do we believe that strategic industries matter? Do we believe that economic security, industrial resilience and national security are worth safeguarding? Do we believe that steel-making communities deserve a future? The Government’s answer to each of those questions is yes. The Bill demonstrates our resolve to safeguard a strategically important industry. It demonstrates our commitment to safeguarding jobs, supporting communities and securing Britain’s industrial future. It demonstrates that this Government are prepared to act decisively when the national interest demands it.

Today, we have an opportunity to send a clear signal to steelworkers, investors, industry and the country that Parliament is committed to preserving and strengthening Britain’s steel-making capability for generations to come. I look forward to the contributions that noble Lords will make during this debate and to the constructive scrutiny I know this House will bring to the legislation. I beg to move.

17:28:00

Lord Hunt of Wirral (Con)My Lords, I start by congratulating the Minister on his appointment last Friday as Parliamentary Under-Secretary of State at the Department for Business and Trade. He has a long established and proven track record of success in business. I hope that his voice will be heard loud and clear within government. I wish him well and hope that he will emerge from our debates with his reputation enhanced.

At the outset of this debate, I make it clear that my party accepts that steel is a strategic industry. Steel helped to build our past and I agree with the Minister that it will shape our future. It matters to our national resilience, to our defence capability, to our manufacturing base, to our construction sector and to communities right across the country. Recognising the importance of steel is not, however, the same as accepting that nationalisation is the necessary answer. The central issue facing the sector is competitiveness, and the Government have still to set out a credible plan to address just that.

Last week, Al Carns, who was then Minister for the Armed Forces, resigned from the Government. He has since argued that energy policy has to be treated as a matter of security, but high energy costs are making British steel less competitive globally. The Government’s chosen path towards lower carbon production will dramatically increase the sector’s reliance on electricity and therefore require very substantial capital investment. The industry itself has warned that high electricity prices risk undermining its long-term plans to decarbonise. The Government acknowledge that steel is vital to national security. If that is the case, surely the energy policy upon which steel depends must also be judged through the lens of national security, resilience and industrial capability.

The Government came to office promising a £2.5 billion steel fund—a fund that was supposed to transform the sector, modernise production, support new technology and crowd in private investment. There is now a real risk that that money will be used not to transform British Steel but simply to plug the losses created by the Government’s failure to address the underlying causes of uncompetitiveness.

If hundreds of millions of pounds are being spent merely to keep British Steel operating day to day, and if still more liabilities are now to be brought on to the public balance sheet through nationalisation, how much of that £2.5 billion will be left for genuine transformation? How much will remain available to support new technologies, energy-efficiency improvements and the investment needed to secure the industry’s long-term future?

This leads to a more fundamental questionwhere does this end? Will British Steel, under public ownership, be expected eventually to stand on its own two feet, or will taxpayers be asked to fund operating losses year after year, while Ministers continue to promise that help is just around the corner? Before Parliament grants these powers, surely it is reasonable to ask what the end state is, what the exit strategy is and how the Government intend to measure success beyond simply writing more and larger cheques.

The Government’s impact assessment makes it clear that the costs of this Bill will be substantial. These costs include the possibility of capital injections, working capital support, operating costs if the company remains loss making, compensation, administrative overheads, and the expenditure inherent in establishing and running a government-owned company. So I ask the Minister what the Government’s estimate of the total cost is. Will Parliament be told that figure before the Bill receives Royal Assent?

We must also question the Government’s approach to ensuring environmentally friendly steel. Ministers have chosen a pathway that the industry warned will be more costly, more electricity-intensive and thus more difficult to finance. In the other place, the Secretary of State Peter Kyle said that

“the long-term future of the UK steel sector relies on public and private investment ”.—[ Official Report , Commons, 21/5/26; col. 787.] If the Government’s preferred model drives up costs and makes the United Kingdom less attractive than competitor countries not operating under the same net-zero constraints, where is that private investment supposed to come from? Investors can choose where they deploy capital; if the Government make steel production more expensive, more regulated and more politically uncertain, they will look elsewhere.

The Government’s impact assessment of 13 May is clear and explicit about the risk to investment. I quote its paragraph 75:

“One potential impact is a chilling effect on investment as investors may perceive an increased risk of government intervention. This could increase uncertainty for investors and therefore deter future investment in the UK steel sector. If investors perceive these risks as material, they could further undermine the recovery of the sector, putting jobs and capabilities at risk”.

This is a remarkable admission from any Government.

The Government have also not properly addressed the wider trade risk. If British Steel is to be subject to constant and persistent subsidisation at the expense of the taxpayer, Ministers must explain how they intend to ensure that this remains compliant with the United Kingdom’s international obligations. Prolonged state support, if not carefully structured, could risk challenge under WTO subsidy rules and invite countervailing measures from trading partners. That would not be a theoretical concern; other countries could impose countervailing duties, raise disputes or just take other retaliatory action if they believe that UK steel is being unfairly subsidised.

Such action could not only harm British Steel itself but damage the wider UK steel sector and the downstream industries that rely on steel inputs, including automotive, aerospace, defence, construction and advanced manufacturing. Can the Minister therefore tell the House what assessment the Government have made of the WTO implications of the Bill and of any continuing public subsidy to British Steel? Have Ministers had any discussions with the World Trade Organization or major trading partners about the proposed structure of support? What conversations do they intend to have before any transfer into public ownership takes place?

On the issue of trade, I also raise the significant concerns expressed by stakeholders across industry about the Government’s steel strategy and, in particular, their tariff policy. The Government appear to have conducted a partial U-turn: it seems that we did not need to wait 12 months for a formal review for Ministers to discover that tariffs can be harmful—if only more than a century of economic history had already taught us that.

The first point is one of parliamentary accountabilityany change to the Government’s steel tariff regime should be reported to Parliament first, so why are Members of both Houses having to learn through the media about possible changes? That is just not acceptable, and it gives the impression of a Government making up policy in response to headlines rather than setting out a coherent and properly examined trade strategy.

We have already seen the risks of retaliation. We have seen concerns in relation to the United States and questions raised on India, including the possible implications for the trade deal. We now read of concerns about the European Union, with reports that the Secretary of State has been to the EU to plead with it not to reduce tariff-free imports of British steel. What did the Government expect? If the UK chooses to escalate protectionist measures, it should not be surprised when trading partners respond in kind. Retaliation was not unforeseeable; it was predictable. We saw the European Union respond in precisely this way to President Trump’s tariffs. Did the Government really fail to assess that risk before introducing their own regime?

Countermeasures, reduced market access and increased uncertainty could all make it much harder for UK producers to export, and harder for investors to commit capital. At the same time, tariffs risk raising costs for downstream sectors that rely and depend on steel inputs —metal forming, automotive, aerospace, construction, defence and advanced manufacturing among them. These sectors are central to growth, productivity and investment. If tariffs increase their costs, reduce their competitiveness or force them to source elsewhere, the Government will have weakened the very industrial base they claim to be trying to strengthen.

I therefore ask the Ministerwhat assessment has been made of the impact of the steel tariff regime on downstream manufacturers? What assessment has been made of possible or likely retaliation by trading partners? Why should British businesses have confidence in a strategy that appears to protect one part of the supply chain by imposing costs and risks on so many others? We cannot just ignore the wider business climate the Government have created.

I am not going to go into detail about the Employment Rights Act 2025, but that will not stop me raising it, because it is making the business environment less competitive and less conducive to investment. Combined with those increased national insurance contributions, endless reporting requirements and carbon taxes, the Government are damaging the steel sector, along with every other sector of the UK economy. For a steel sector already operating under intense global pressure, these additional costs affect hiring, investment, margins, productivity and the ability of British steelmakers to compete. In the light of the importance to our national security, the steel sector may be a special case, but that does not mean it is immune to the effects of wider government policy.

Many questions remain to be answered. At this point, His Majesty’s Opposition are far from convinced that nationalisation is the best option, or even the so-called least worst option, but we are eager to hear some, or better still all, of those questions answered as the Bill progresses. Steel has shaped our nation’s history. The challenge now is to secure a future for the industry that is internationally competitive, financially sustainable and attractive to investors.

17:42:00

Lord Bilimoria (CB)My Lords, I thank the noble Lord, Lord Leong, for introducing this debate, and I too congratulate him on his well-deserved appointment as a Minister. This Steel Industry (Nationalisation) Bill is a government Bill, and it will provide powers to nationalise any company involved in steel manufacturing where that is in the public interest. But we know the focus of the Bill is the potential nationalisation of British Steel Ltd, a company currently owned by the Chinese company, Jingye Group, and subject to ongoing government financial assistance, and it is still operating.

The Government said in May—last month—that they were minded to nationalise the company. This was cautiously welcomed, including by the local community in Scunthorpe, but concerns have been raised about the significant cost and complexity of nationalisation. Of course, the Chinese Government have urged the UK to act prudently and said that they would protect Chinese business. The Conservative Party, as articulated by the noble Lord, Lord Hunt, very clearly just now, has set out its opposition to the Bill, and stated that it does not address the problems affecting the industry, which I will address.

The company, Jingye Group, operates the only remaining blast furnace for steel, in Scunthorpe. This is the country’s only remaining production capacity for making virgin steel. If the blast furnaces are switched off, it can be very difficult and costly to ever return them to operation. The company was preparing to close down the furnaces, and noble Lords will remember that last year Parliament was recalled—something that very rarely happens. We passed emergency legislation, the Steel Industry (Special Measures) Act 2025, which gave the Secretary of State the power to intervene in steel undertakings—and that is exactly what has happened.

The result is that the production plant at British Steel is still producing. The Government have stated that they now want to modernise and co-invest with the private sector. The Minister for Industry, Chris McDonald, set out the details and said that government officials would continue to provide on-site support. To date, the Government have spent almost £0.5 billion on working capital to support British Steel. Can the Minister confirm that? When it comes to modernising and decarbonising, and providing stability for workers, suppliers and customers, the Government recognise that that will require both public and private investment. Can the Minister confirm that?

Then there is the impact assessment that was carried out for this proposal. It said that the 2025 Act provided only short-term emergency powers and did not allow for the longer-term planning or investment required. It also said that the powers could create fear among investors and put off UK investment in the sector—owing to, for example, concerns about government intervention —and that this could undermine jobs and attempts to develop the sector. Will the Minister acknowledge that aspect? The impact assessment also said that, on the other hand, the powers could have a positive impact on supply chain confidence and reduce uncertainty, boosting investment in jobs in the sector, and that they could have wider impacts on supporting and stabilising the economy and jobs. Overall, the impact assessment said that the socioeconomic benefits were likely to outweigh the associated costs, and that there would be a post-implementation review within five years. There is now the beginning of a clear and credible long-term plan for British Steel, with low-carbon steelmaking as a priority.

An important point from a legal perspective was made by Peter Ware, who is a partner and head of the government sector at the law firm, Browne Jacobson; I have to declare my interest, as I have worked with this firm in my business. He described this as

“one of the most significant acts of state intervention in British industry in decades”,

and said that it would raise

“substantial questions that will need careful navigation”,

including on compensation and the transfer of employees. Will the Minister acknowledge this?

Of course, there are underlying sovereignty concerns that losing the Scunthorpe furnaces would, as the Minister said in his opening speech, leave the UK as the only G7 country unable to make steel from raw materials, and dependent on imports for a material central to defence and infrastructure. I am co-chair of the India All-Party Parliamentary Group, and the UK signed the CETA with India—its FTA—last July at Chequers, with implementation due any time soon. There was a pitch to Indian capital, yet the Bill contains a discretionary power to seize a foreign-owned steelmaker. That is scary to any potential investor and sends the opposite signal to the Vision 2035 partnership at the worst possible moment, when we are about to implement the CETA.

Also to do with India, there is Tata, India’s flagship industrial investor in the UK, with Jaguar Land Rover and of course the £1.25 billion investment in Port Talbot’s electric arc furnace, which the Government have supported with £500 million of grants to save 5,000 jobs. The Bill defines a “steel undertaking” generically. Can the Minister confirm that the Government’s intentions are to do with Scunthorpe and not to do with Tata? Having secured Tata’s £1 billion commitment, the UK is handing itself a power to expropriate that same asset in the public interest, and that is quite scary.

Moreover, when it comes to compensation and the valuing of the business—this needs to be taken into account—nil compensation could be awarded. This is something the Government could do. Tata’s entire transition therefore rests on government co-investment. If the state can seize the asset and value it, but for the support of the UK Government, the inbound investment is worth little or nothing. This is really very scary to a country we have just signed a free trade agreement with—a country with which we are hoping to double our bilateral trade from nearly £50 billion to £100 billion by 2030.

Peter Ware of Browne Jacobson again said:

“The compensation question is particularly complex: with the government having already committed over £400mn in working capital, Jingye’s scope to claim substantial compensation may be limited, but legal challenges under bilateral investment treaties or domestic property rights principles cannot be ruled out”.

Will the Minister acknowledge this?

Shevaun Haviland is the director-general of the British Chambers of Commerce. I chair the International Chamber of Commerce UK; we are the regional co-ordinators for Europe, and she sits on the board of the ICC UK. She warned of

“significant financial and logistical problems”

from planned tariff changes, cautioning that revised quotas and tariffs risked

“economic damage in key supply chains”

for sectors such as car-making, aerospace and medical technology.

Can the Minister please clarify the rumours circulating in the press that India may reduce tariff concessions for the UK due to steel tariffs jeopardising the FTA that we have signed and that this FTA should be separated from any issues to do with steel? That would be really reassuring to hear.

On top of this, we have the backdrop of US tariffs and the UK’s high energy costs. The Government announced their much-delayed steel strategy focused on reworking trade quotas designed to protect steel majors from a glut of Chinese imports. Before that, Tata Steel—I do not want to miss this point—had broken ground with £500 million of government backing, which is going to be a pivotal moment in UK steel-making in future. It is expected to cut the site’s carbon emissions by 90%, thanks to the £500 million help from the Government that will save 5,000 jobs. Tata Steel says it is paramount that how it operates and what it is doing should be a distinguishing fact versus what is happening with UK Steel in Scunthorpe. We need clarification that these powers are not going to be implemented for a company such as Tata.

Domestic demand is a challenging opportunity. The UK steel industry now supplies only 32% of the UK’s overall steel demand. Will the Government commit to a minimum threshold of 30% domestically produced steel? On top of this—this is a point that the noble Lord, Lord Hunt, mentioned—the UK’s energy prices are some of the highest in the world and certainly the highest in Europe. I will give some facts. UK steel producers face an average electricity price of £66 per megawatt hour, compared with Germany at £50 and France at £43. We pay up to 50% more than our main competitors right at our doorstep in Europe.

On top of that, steel is a highly traded commodity. I am chair of the ICC UK and regional co-ordinator for Europe. Our expertise is in trade. Our competitors in Europe have successfully accessed government grant funding of 50% and more for major operational changes. China’s steel subsidies are more than 10 times higher than those of OECD countries and more than five times those of non-OECD economies. Steel subsidies in non-OECD countries are 42% higher in terms of cash grants, and 11 times higher with respect to below-market borrowings than in OECD countries. How do we create a level playing field when we are facing this sort of competition worldwide? On the other hand, there are great opportunities. Renewable energy infrastructure presents a huge opportunity for the UK steel market. One report shows that just the offshore wind pipeline will require 25 million tonnes of steel by 2050, with a potential value of £21 billion to the UK steel market over the coming decades, which will be great for our British steel industry. This reinforces that we need to have that 30% minimum threshold.

We are paying more than 50% more for our electricity than our counterparts in France and Germany. When it comes to facing excess steel-making capacity, the gap between global capacity and crude steel production in 2023 was estimated at 543 million tonnes. That is 70 times the size of the UK market. Exports from China this year are expected to reach 100 million tonnes, the highest since 2016, when the last steel crisis saw several steel plants close and thousands of jobs lost in steel-making countries around the world, including the UK. On top of that, there is the effect of the US tariffs. Tata Steel, for example, exports about 170,000 tonnes of products to the US. Those products are not made in the US. They can come only from us, so the US needs what we produce.

There is no questionwe cannot compete on costs with producers in China and across Asian markets. They have lower environmental regulations and cheaper carbon-intensive energy and labour costs. It is very difficult. On top of that, UK steel producers face higher network charges despite the Government’s recent announcement of a 60% exemption for charges starting in April last year. Germany produced a 90% exemption and France 80%, so we could do more. Can the Government do more to help our industry?

My last two points are about research and development and innovation. Tata Steel spends around £10 million to £15 million in R&D and collaborates with universities such as Warwick, Swansea, Cambridge, Sheffield, Cardiff and Imperial College. We must encourage more of this research and development between our industry and universities. On skills, we need core capabilities in engineering, metallurgy, safety, sustainability, leadership, advanced digital, green skills and AI.

To conclude, I have the privilege of chairing the Manufacturing Commission, which is the research arm of the All-Party Parliamentary Manufacturing Group. Although manufacturing was 30% of GDP in the 1970s and has now gone down to less than 10% of GDP, the UK is still the sixth-largest economy in the world and the 11th-largest manufacturer in the world in absolute terms. It is, most importantly, high-quality manufacturing that we are proud of. Steel is a vital part of our manufacturing industry. We must do all we can to ensure that our steel industry continues to flourish and prosper.

17:56:00

Baroness O’Grady of Upper Holloway (Lab)My Lords, I too offer my warm congratulations to my noble friend the Minister on his appointment. I strongly welcome this Bill for the simple reason that our country must have a sovereign capability to make steel, and I commend the Government on acting swiftly. Taking powers to nationalise in the public interest is an essential tool of a modern industrial policy. We have done it before. In 2009, with cross-party support, similar powers were taken to stabilise the banking and finance industry. If we can bail out bankers, we can certainly support our steel-workers.

Steel is a vital part of our economy, as we have heard. Critical infrastructure such as roads, bridges, defence capability, hospitals, schools, housing and wind turbines all rely on steel. Some would add to that list Wembley Stadium, which was built with British steel. In today’s world, we cannot afford to leave ourselves at the mercy of China dumping cheap steel on the global market or the United States playing a capricious game on tariffs. Nor can manufacturing depend on supply chains left vulnerable by wars made in Moscow or Washington, so the Bill is essential for our security.

Many other advanced economies recognise the value of a mixed economy and the important role that state intervention and ownership can play. Germany, France, Italy, Belgium, Spain, China and India already provide major state aid to their steel industries. The state can intervene not just to correct market failures but to accelerate industrial success. It can both protect and grow firms of strategic importance and, for good measure, lift skills, living standards and whole communities.

The Opposition once recognised that. In 1971 a Conservative Government led by Ted Heath, admittedly somewhat reluctantly, nationalised a strategically important firm that was on the brink of bankruptcy. It was called Rolls-Royce. Some mounted the same arguments against nationalisation back then that we hear from some quarters today: that it was too expensive or that government should not bail out so-called lame ducks. History records that under state ownership, Rolls-Royce produced a new generation of engines that were a huge commercial success. It was only 16 years later that Rolls-Royce was sold off alongside a good deal of the nation’s family silver, including, of course, the national grid. Over subsequent years, bill payers and taxpayers have paid a high price for that 1980s dogma of privatisation. Now the steel industry is at a crossroads.

According to More in Common polling last year, the public think that the Government should take state control of the wider steel industry. More than half the public support this, with only 13% opposing. Support for public ownership of British Steel is even higher. Roy Rickhuss, chair of the National Trade Union Steel Co-ordinating Committee, and a former steel worker himself—in fact, I think he is also the son of a steel worker—backs this Bill. Gareth Stace, director-general of the trade association UK Steel, strongly backs it too. They agree that, without support, our steel industry risks falling further behind international competitors, but with state backing British Steel can become a global leader once again.

Let us be clearwe owe our steel workforce. Their vital work is hard, and it can be dangerous, so we owe them respect for their skill and resilience, but, most of all, we owe them respect for their sheer determination to see a successful and sustainable future for their industry and for their communities.

In conclusion, I would welcome my noble friend the Minister’s views on the following. First, I agree that we need to deliver competitive energy prices. Can he tell us what additional support there will be for energy-intensive industries, including progress being made to speed up and scale up grid connections? Secondly, we must match the ambition of other countries’ investments in green steel production and ensure a just transition for workers. Can the Minister update us on discussions with the steel industry and trade unions to develop a just transition plan, and does the Minister agree that all technological options need to be on the table? Thirdly, can the Minister comment on the need to introduce robust climate measures to protect us from dirty steel imports, and on progress to mandate the procurement of UK-made steel for defence, energy and major infrastructure projects, including a clear forward pipeline to encourage long term investment?

Finally, in this House I have previously asked about the Government’s assessment of the impact on UK manufacturing of the EU Industrial Accelerator Act. I would add to that question another one on the impact on UK steel of the European Union’s plans to cut tariff-free quotas by 47%, to double tariffs from 25% to 50% and to impose melt-and-pour requirements. I would be very grateful if the Minister could provide an urgent update on the reset negotiations, and other discussions with the EU on these specific matters, either now or by letter.

18:03:00

Lord Redwood (Con)My Lords, I congratulate the Minister on his appointment. I am also very grateful to the Minister for his honest account of this legislation, where he made it very clear that it is very likely that the strong powers in this legislation will be used sometime soon fully to nationalise the Scunthorpe works. That, I think, makes it even more curious that the Government he represents have given us an impact assessment with no numbers in it at all, no account of what a nationalisation of the Scunthorpe works would look like, what impact it would have on the public budgets, what impact, as my noble friend Lord Hunt said, it would have on the £2.5 billion allocated for steel as a whole, and no account of how it would be a transfer of money we thought had been allocated for capital investment and modernisation in creating something new to the purpose of paying losses on a very old plant whose future is very uncertain. During this debate and over the course of this Bill, I hope we can get some numbers from the Government.

When the emergency legislation went through a year ago, I think both Houses of Parliament understood that the Government were not then in a position to produce numbers, but at that point, in those debates in both Houses, strong voices said, “There must be a business plan; there must be budgets”, and we were told at that stage that these would be forthcoming in relatively short order—but we await them. We still have a menu with no prices. We still have a lack of information about what the business plan of a nationalised Scunthorpe would look like, just as we have travelled for a year with a Scunthorpe that is run by the state and paid for by the state, but not owned by the state, making enormous losses which, according to the press, have been running at £1.3 million a day. We were offered no explanation of how long this might go on, when those green shoots the Minister reports will actually translate into real cash, how much steel this plant needs to sell and at what kind of prices before it can have a positive margin or before it can maybe halve the negative margin which it has been running at for all too long. Indeed, we were told at the point when the state took on these mighty obligations that, under the previous Chinese owners, it had been losing about £700,000 a day, so if the more recent press stories are right, the losses have clearly been considerably worse over the last year.

I understand that the Minister cannot firmly say they are definitely nationalising because they have put in this public interest test and they obviously have not yet applied the test to any project to nationalise which they are currently planning. However, reading how wide the public interest test allows the Government to be in order to satisfy themselves, I do not think it is any actual prevention of the nationalisation of Scunthorpe. I am sure they are quite clever enough to come up with a plan that is well within the details of the public interest test, widely drawn as it is in this piece of legislation, so I do not think that is a reason for not giving us proper figures.

I think it would also be good, over the course of this Bill’s debates, if we could hear a more honest statement to the workforce of Scunthorpe, because the Government say two different things. They tell the press and the rest of us—and we are very relieved to hear it—that they have saved the jobs, but then the Government still seem to be wedded to a net-zero strategy, which says that all blast furnaces of the Scunthorpe type have to close—and they are the only two left—to be replaced by electric arc furnaces. Therefore, if that is still the plan, we need to be told that honestly, and the workforce needs to be told that, because, of course, there will be a very big reduction in the numbers of people working, should they switch from blast furnaces to electric arc furnaces in the case of Scunthorpe, as the Welsh steel industry discovered when the previous Government went on that journey, carried on by this Government, to replace those blast furnaces with electric arc furnaces.

Ministers should have a personal interest in wishing to get beneath the numbers and work out how much it is going to cost, not just because of pressures on public budgets and the need to assess this against alternative ways of spending the money, but also because we read that, when the initial transfer of the liabilities and the running of the plant was made to the state, the senior civil servants apparently said to the Secretary of State and Ministers that they were not able at that point to sign off that this was value for money. They were not able to sign off that it was definitely going to be a policy that was going to work. They were not saying it definitely would not work: I think they were saying they did not have enough time and it would require a lot of very detailed work and consultation.

Ministers used their right to issue a direction to the Civil Service to say, “We think the public interest is such that this is urgent, and so we are going to ignore the absence of sign-off on value for money and on the efficacy of the policy because it is worth a shot and we, Ministers, will take responsibility”. I understand that, but, having taken that responsibility, the Ministers are under more of a personal duty to come to this House and to the other place with proper budgets and proper business plans to show that there will be value for money as they go on this course. Indeed, I think we need a year’s audited statement on what has happened so far with all that money passing to a Chinese-owned business, which the state largely controls but where it does not own the assets.

It would be good as well to be updated on where the Government have got to in negotiating with the Chinese owners. I think it is tragic that we have not had a deal with the Chinese owners. Maybe it is the fault of the Chinese; I understand that there are two sides in any negotiation. However, when I looked from the outside, just using public sources, at what was on offer when the state moved in a year ago, I thought that, as a rough rule of thumb, if the state said to the Chinese owners, “We will take full responsibility for the workforce and their future payments, so we save you all the redundancy payments you would have had to make if you had carried out your closure”, the state would take on the land and buildings in the state that they were in, probably with many environmental obligations and costs of clean-up, and that would have been another relief for the Chinese authorities of the company, because otherwise they could be liable for having to clean up the site after they had closed it.

In return, the Government should have said, “You definitely keep all the debts you have incurred during your unsuccessful period of management, and the value of your share and your land and plant we would put at £1 to complete the transaction”. Some people thought I was being a bit generous there, but I think that was the shape of a deal that one might have been talking about. According to press comment, the Government have been thinking about £100 million of compensation for the liabilities that they are absorbing to also obtain the plant and the land in its current state.

We read in the press that the Chinese say that, no, they want £1 billion for this transfer of the freehold and the shares, which would seem to me to be extremely excessive in the circumstances. I would fully support the Government pushing back very hard on that and, if necessary, defending themselves in court if they cannot get a deal. But it would be in everybody’s interest if a deal could be reached. Getting to that deal would be helped if we had a published statement of the likely business plan for an enterprise now in public control and maybe soon to be in public ownership. That would also help create a mood for the negotiations with the Chinese.

I fear that that business plan, certainly for the last year and probably for the next year or so, would produce an awful lot of red ink. It would be the background to explaining to the Chinese why the idea that they might walk away with £100 million or £1 billion is for the birds. They have presided over a heavily loss-making business and they were unable to find a way to make it work, so they were thinking of incurring massive costs of closure as the alternative to carrying on with a very high rate of losses.

Like all the other speakers in this debate, I think we want a proud steel industry again in Britain, as we were used to having over many decades. I also think there is a case for keeping a virgin steel manufacturing capability, as well as a lot of electric arc recycling steel capability. That would require a study of how much longer one could carry on with these two blast furnaces, which the state will probably own quite soon, and of what would be a sort of deep or long-term maintenance schedule if it is thought that they can carry on, because these are quite ageing plants. That would perhaps be a better option than having to think about how to find an investor who wants to establish new virgin steel-making capability in our country.

What is very clear in the wider debate of the Minister and the Shadow Minister’s opening remarks is that we will not have that opportunity—through inward investment, or domestically financed investment, or City financing through private equity, or new equity issued through the AIM market, or whatever—of steel-making capability in this country as long as our energy prices are sky high.

We heard unfavourable comparisons in a previous good speech with European competitors, but, of course, they are not the main threat. Asia and America have energy prices considerably lower. In the case of the United States of America—a first-world competitor in many fields, with a much stronger economy than the European one—its electricity prices are one-quarter of the prices that industry in Britain has to pay before any subsidy.

The Government are following a bizarre policy towards energy. They put on massive carbon and emissions taxes, and all sorts of other taxes if we dare to produce any of the energy ourselves, or else we have to pay other people’s heavy oil and gas taxes as we import so much. Then they realise that this produces energy prices that mean the loss of jobs and the mass closure of industry. We have seen refineries and bits of the oil industry go, we have seen petrochemicals go, and we have seen a lot of our steel industry and a lot of our ceramics industry go.

So then they say, “Why don’t we offer a little bit back by way of subsidy to discount the very expensive energy prices we’ve got with these very high taxes imposed on the energy?” This is a very bad way of doing it: you get the worst of all possible worlds. You deter investment because the energy prices are too high. You do not give enough back in subsidy to make the businesses competitive, so they still close. You are left with a situation where you are deindustrialising, so your import bill for goods goes through the roof. Your import bill for energy also goes through the roof because of the bad mistakes made in the energy policy. That is why the UK is struggling so much.

So I plead with Ministers, for their own sakes, to do some sumsfind some numbers, work out what the business case will look like, interrogate your managers, find out what you need to do to help them to sell more steel. Unless you can sell more Scunthorpe steel, there is no point pumping money in; you will not end up saving the jobs. And please tell your workforce whether you are serious about saving these jobs and really want to carry on with blast furnaces, or whether your net-zero preoccupations mean that their jobs are doomed anyway.

18:16:00

Baroness Donaghy (Lab)My Lords, I congratulate my noble friend Lord Leong, both on his ministerial appointment and on his opening speech. I also give full support to the Government for doing their best to protect and modernise a strategic industry that has suffered from past failures to adapt and from short-termism and lack of courage by successive Governments.

It was not the workers who let the side down or the communities who depended on them. These are tough jobs and tough people. My brother-in-law, Don, worked in the steel industry in Scunthorpe for most of his working life. I was there to celebrate his 90th birthday two years ago and he is still soldiering on. As I said, these are tough people.

We could spend a lot of time analysing how we got to this position, how much steel is stuck in the Strait of Hormuz, tariff imposition by the USA, and whether Europe is doing any better. We could pore over the comments by the Chinese Commerce Ministry when it called on our Government to

“respect the wishes of firms and market principles and avoid the abuse of administrative coercive measures”.

We could compare that with Chinese state aid and anti-competitiveness practices. We could score points on all of these things, together with overcapacity, cost and the complexity of the issues, but none of it would preserve a strategic industry or save a single job.

Clearly, issues such as parliamentary scrutiny, sunset clauses and regular reports to Parliament are important and can be discussed more thoroughly in Committee. This Bill is a signal that the Government are ready to act if it is in the public interest to do so. At present, we are not in control of our steel industry. We do not have sovereignty.

Why is the public interest not more closely defined in the Bill? I accept the explanation that we cannot forecast the circumstances. Will it be defence, national security or the construction, maintenance and operation of critical infrastructure in the United Kingdom? Which companies might be the first to impact on us? The noble Lord, Lord Bilimoria, asked this—quite understandably, given his connections with the Indian industries. Included in this must be where a steel company attempts to take a decision that might have a detrimental national implication, whatever the name of the company. I do not believe that any Minister would choose to be in this position today. There are no guarantees of success and no political kudos. It is about taking tough decisions to keep a national lifeline to try to protect our future security.

The Government recognise that blast furnace production will need to continue in the immediate future—I am sure they welcome the remarks by the previous speaker, the noble Lord, Lord Redwood, on that—and that a managed transition is vital to monitoring supply. They accept the need for public and private investment to modernise. That was repeated several times in the debate in the other place.

Opponents of the Bill have cited the cost of employees and energy. Workers in the UK earn an average of £40,000 a year and represent only 13% to 22% of total costs, depending on operating a primary basic oxygen furnace or a recycled electric arc furnace, so I argue that this is far from a labour-intensive industry. However, as has been said by previous speakers, energy costs are a different matter altogether and represent the highest in Europe. I understand that the British industrial competitiveness scheme is being developed as part of the UK’s industrial strategy and could save a substantial amount in energy costs, but it is not due to be launched until April next year. Is there any chance that this could be brought forward? Does the Minister have any more information on the development of that policy? Germany, Spain and France have already intervened on energy costs in their steel industries. As we are now, we cannot provide long-term control or stability. We must safeguard supply chain resilience for defence, critical national infrastructure and major programmes, as stated in the impact assessment. The Government need to have the ability to respond quickly and effectively. I commend the Bill to the House.

18:23:00

Lord Frost (Non-Afl)My Lords, I congratulate the Minister on his promotion and thank him for his very clear opening statement. The problem we have today is that we are looking at a Bill that is important in its own right but is only one part of a much bigger problem: can we sustain a steel industry at all in this country and, if so, how? I am not quite such a fan of the Government’s March steel strategy as the Minister is. The problem is that what one thinks of this Bill really depends on what one thinks of this broader strategy and how viable it is.

I sympathise with the Government’s difficulties, even though they are in part self-generated, although not wholly. Even somebody as economically liberal as me recognises that we are hardly operating in a free market environment in this area and that some sort of government steering hand is needed. We all have an interest in maintaining a viable steel industry in Britain, after all. It is the design that is crucial.

I want to set out three contextual problems before talking about how we might find a way forward. The first problem has been alluded to before: the fact that there is no genuine market in steel globally. We know about the huge amount of structural overcapacity worldwide, the Chinese subsidies and the reaction—the wave of tariffs, quotas, anti-dumping measures and so on that has spread across the industrialised world. There is no sign that that is going to change any time soon. In that context I understand the Government resorting to tariffs. I certainly do not like them, but it is unreasonable to exclude them as a weapon. They could be better targeted on particular kinds of steel, stronger rules of origin and perhaps bigger TRQs for reliable suppliers. Maybe the Minister can say whether the Government have considered this or might consider it in the future as a way of reducing the downstream effect on our own producers.

The second problem is the need for resilience and the national security issues that go with that. That means maintaining a necessary sovereign capacity, as other noble Lords have said. The question is, what does that sovereign capacity actually mean? The UK currently consumes about 12 million tonnes of steel a year. It is going up slightly. Domestic production is about 30% of that and the Government say they want it to go up to 50%. It is never going to be 100%. Sovereign capacity does not mean producing everything you consume; it is about defining the capabilities you cannot afford to lose and the supply chains you cannot afford to depend on. Others will have different views, but my assessment is that the main capabilities we should be focusing on are: the defence-grade plate, forgings and specialist alloys that are broadly made in Sheffield, and the Government are committing to that; stockpiling and reliable contracts for the upstream supply chains; and rail and critical infrastructure products currently made at Scunthorpe but unprofitably.

The first of those three categories is largely state guided and in part state owned. As for the second, stockpiling, the Government have said nothing at all about this. On the third, Scunthorpe, the Government have not really been clear about the national security or resilience case for keeping Scunthorpe going. The Minister mentioned that it was about maintaining the ability to produce steel from scratch from raw iron, but an EAF plant with a DRI plant can do that as well, and that may well be the direction of travel. It is not in some particular resilience in the upstream supply chain either. After all, we no longer make coking coal in the UK, so we have to import that anyway to keep Scunthorpe going. As far as I can see, the only real case is transitional: to keep the UK as a main supplier to the rail industry while the new electric arc furnace facilities are built at Scunthorpe. I do not know whether this is the case or what mix of these things is the Government’s thinking on Scunthorpe. Perhaps the Minister can give us a bit more detail on that.

The third problem is this. If we are envisaging a modernised steel industry of some kind in this country and the capacity of specific types for specific purposes, can it be done profitably over the long term? Is it viable? I think our answer to that is yes. We can see it done in the US in the mini-mill industry and elsewhere—Turkey, for example, has a profitable steel industry based on EAF plants. Maybe this points to a UK model that is something like specialist capability for defence in Sheffield, two or three EAF clusters, perhaps including Scunthorpe, and this question of a DRI plant, which is touched on in the Government’s strategy but not brought to a conclusion.

Perhaps we could all agree to this as a viable destination. The problem is, how do we get there? As a destination, it depends on a cost and business environment that currently does not exist. Electricity is super expensive and getting more so. The business environment is poor and getting worse. As a transition, it involves somehow encouraging investment into this poor business environment, or else the Government coming up with the money themselves. This is why we have the problem that this Bill encapsulates. We are heading for a destination, however desirable it may be, that is probably unviable in current conditions without massive government help. This is the problem with rushing to nationalise Scunthorpe without thinking it through properly.

So where does that leave us? In the circumstances, there is clearly a case for the temporary nationalisation of Scunthorpe, on certain conditions. Temporary public ownership may be justified—and we wait to hear from the Minister on this—because closure might remove the UK’s primary iron capability overnight, with no clear succession plan. The problem is, as we know, that nationalisation always sets up terrible perverse incentives and poor management, which is why temporariness is really important. There must be a way out and a viable end point. It is reasonable to ask for something clearer on those conditions if we are going to proceed satisfactorily, and I give notice that I will probably put down some amendments to that effect.

We need three things. First, we need a clear exit strategy for Scunthorpe: the blast furnace run-out date if there is one, an EAF commissioning date if there is one and a target for return to the private sector. Without that, Scunthorpe risks becoming British Leyland—a permanent loss-making ward of the state where all the incentives are just to put in more money and hope that things turn out better, impossible to close but impossible to fix either.

The second condition—unfortunately, this is far from being fulfilled—is electricity and energy prices and a business environment that support a viable industry. We know the problem with electricity prices. It has been said that the British industrial competitiveness scheme exists and will hold down those prices, but that itself is only cross-subsidy. We are supposed to believe, and the Secretary of State for Energy has said, that our great net-zero project is going to bring prices down in the future, so why do we need the cross-subsidy if that is really the case? There is a real problem here with the strategy.

It is not just me saying that; plenty of people are. Dieter Helm, who is a pretty neutral commentator on this subject and has certainly supported net zero in the past, wrote on 3 June that the industrial consequences of the Government’s energy policy

“have been dire. High electricity prices have contributed to the closure of Grangemouth … the Exxon refinery in Scotland, one of the Hull refineries, the closure of most of the steel industry, the closure of the fertiliser and fibreglass industries, and severe problems for pottery and for glass-making. Car manufacturing is back to the 1950s’ levels. There is devastation amongst the SMEs … unfunded welfare spending has increased the cost of capital … Energy policy has reduced economic growth, not increased it”.

That is the problem. We are building a steel industry—we hope—in that environment but it is not clear to me how it is going to survive in those circumstances.

The third thing we need is a proper strategy for the industry as a whole, not just for Scunthorpe but something broader. What is the end point? Is there going to be a DRI plant or not? Do the Government recognise the need for the stockpiling of hard-to-source EAF kit and scrap? Do they recognise the need for strategic stockpiles of defence plate billets, HBI and so on?

The problem we have, to return to where we started, is that the March strategy covers only about half the ground. It commits on Port Talbot funding, on expanding Forgemasters and on one or two other things, but it is unclear on Scunthorpe—the subject before us today—non-committal on DRIs and silent on stockpiling. It says little or nothing about whether the future industry can be expanded further if we need to upgrade our defence effort. Above all, it does not tell us what the hierarchy of objectives is. What is the Government’s choice framework? When national security clashes with profitability, what is most important? When employment clashes with modernisation, do we protect jobs or do we fund the transition? When net zero clashes with the industrial base, do we change the plans or continue the charge of the Light Brigade to industrial suicide? That needs to be clear if it is a strategy. I would like to think the March strategy was interim but I do not know. Perhaps the Minister could say whether any thinking has been done on this broader approach and whether a broader strategy is needed.

Britain is not going to get back to a world of free trade in steel—that is not going to appear any time soon—but it can have a steel industry that is smaller, smarter, sovereign in the things that matter and capable of paying its own way. The problem is that putting so much of this in the hands of a Government relies on a Government who are capable of strategising for industries and running them, but history suggests that Governments are not good at those things. We are right to be sceptical about the approach and to ask for more information. Perhaps in winding up the Minister could start to give us some of that.

18:36:00

Baroness Noakes (Con)My Lords, when the Government took powers to take control of British Steel’s operations last year, they were clear that they had no intention of nationalising it. Now nationalisation is the name of the game. This pivot has nothing to do with the Government’s failure to reach an agreement with the owners of British Steel; the weakness of the Prime Minister has driven it. In his desperate attempt at another reset after last month’s local government elections, the Prime Minister reached for the socialist playbook of nationalisation. This was aimed at placating the trade unions and the left wing of his party, and they duly reacted with joy. There is no plan for British Steel other than to take it into national ownership. The Government have not said how much this socialist adventure will cost British taxpayers. The impact assessment is very long on words but has no financial analysis, as my noble friend Lord Redwood has said. Parliament is being asked to buy a pig in a poke.

Nationalisation is not the answer to the root causes of unprofitability in the steel industry, as many have said today. As for all British businesses, high unemployment costs and taxes are an issue, but it is the ruinous level of the cost of electricity that is killing our energy-intensive industries. Now, I am not proud of the former Government’s net-zero policies, which made so much of British industry uncompetitive, but the current Government’s policies are much worse. Industrial electricity prices are among the highest in the western world, as we have heard, and the reliefs already announced but not yet enacted barely scratch the surface of the problem. That is where the Government’s attention should be, not this Bill.

As a matter of principle, I oppose state ownership of businesses. I spent much of my professional working life working first on nationalised industries while in state ownership and later on privatising them, and I am clear that the state was a terrible owner of commercial businesses. There were many downsides of state ownership. Instead of the informed judgments of capital markets, nationalised industries were overseen by civil servants who had little or no experience of business. Key decisions, such as those on investment, were made by Ministers for reasons that were political rather than economic, while trade unions typically called many of the shots and prioritised job protection over commercial success. The result was massive inefficiency that only privatisation could unlock.

One of the biggest problems that faced nationalised industries in the past, and will surely face British Steel if it is nationalised, was financial pressure from the Treasury. Nationalised industries are rightly classified to the public sector, so their borrowing scores as public sector debt. It does not matter whether the debt is provided via the Treasury or borrowed from the market; it is all public sector debt, so there is no escaping the Treasury’s interest in keeping public borrowing in check. We know that the UK’s public debt is not far short of 100% of GDP, a long way from its pre-financial crisis norm of no more than 40%, and the risks are all on the downside. If the powers under this Bill are exercised, we can expect public sector debt to rise as British Steel sucks in more and more cash. The Treasury is unlikely simply to nod in approval.

While I do not favour nationalisation, one of my main problems with this Bill is that it is not a nationalisation Bill. I remember what nationalisation legislation looks like and it is not like this Bill. When businesses were nationalised in the past, there was a clear legislative formula. The Government controlled all key appointments, such as the governing board and the chief executive. The Government had wide powers of direction, which were generally not used but acted as a reminder to the nationalised industry that the Government called the shots. The Government had powers over borrowing, for the reasons I have just mentioned. There were also arrangements for parliamentary accountability, such as the laying of annual reports and accounts.

There is none of that in this Bill. Instead, the Government make great play of basing this Bill on legislation designed to deal with the fallout from the financial services sector after the global financial crisis. That legislation was never conceived in terms of creating nationalised banks and building societies. It was used as a mechanism to sell any saleable bits of the failed financial institutions and to wind down the rest. Its use as a precedent for the nationalisation of British Steel is a category error.

The Banking (Special Provisions) Act 2008 lasted for only one year and it allowed the Government to deal with a very small number of failures such as Northern Rock, which could not find a private sector buyer. The Banking Act 2009, which set up a permanent resolution regime for failing banks and building societies, has been used only once, and that was for a very small building society. I cannot think of a less suitable legislative foundation for a nationalised industry.

While the Government seem to have no idea about the future of British Steel and what role, if any, the private sector might have, they have been clear that the purpose of this Bill is nationalisation. If that is the case, a completely different Bill is needed to give the Government the correct powers and levers. If the Government intend state ownership to be temporary—which I would applaud, though it would doubtless upset their left wing—they need to make this clear on the face of the Bill. For example, there should be regular reports to Parliament on the progress made in returning British Steel to the private sector. There should be a duty on the Secretary of State to seek all reasonable ways of encouraging private sector ownership, as well as an explicit duty to ensure that the cost to the public purse is minimised.

I was pretty shocked by the lack of financial analysis accompanying the Bill, so I have just two questions that I ask the Minister to answer when he winds up. First, do the Government accept that the debt of British Steel will be classified as public sector debt from the day that the Government exercise the power to acquire it under this Bill? Secondly, will the Government commit to giving Parliament a full analysis of the impact on the public finances when they choose to exercise this power and seek parliamentary approval?

18:44:00

Lord Murphy of Torfaen (Lab)I begin by congratulating my noble friend Lord Leong on his debut in this debate. It was a very good one as well, and we look forward to similar contributions in the future. I welcome the Bill. I welcome it because, first, there has been almost unanimity in this debate from your Lordships regarding the significance of steel and the importance of having steel as a critical and vital part of our economy. That is a very important starter. How we do it, I suspect, will be the cause of lots of debates in Committee and on Report. But it is vital to our construction, to our defence and to our engineering. It is vital because of the uncertain world that we now live in: a world of tariffs and wars and presidents who are unpredictable and dictators all around the world. As we debate this, the G7 is meeting meet in Evian, and each of the countries around the table has its own steel industry.

It is also vital—this has not been touched on too much in this debate—for the communities around the steel industry. You would expect a Welshman to refer to the Welsh steel industry as part of our life in Wales. It is in our blood. I come from a family of miners and steelworkers. I represented a constituency in the other place that was a steel-making constituency. In Blaenavon, the Gilchrist-Thomas process was invented, which transformed steel-making in the 19th century. I had in the constituency a stainless steel works, which for generations was hugely important to our communities. As an aside, before I entered politics, I taught in a college in Ebbw Vale at the time when the steelworks was almost completely closed. The impact of that closure on a one-industry town was devastating. That is why, in terms of British Steel and Scunthorpe, it is about the significance not simply of keeping our steel industry but of ensuring that our communities are healthy and intact.

I point out to the House that we are only talking about approximately half of steel-making coming from British Steel. The other half comes from Wales, from an industry which is not nationalised. The great Port Talbot steelworks, which is now changing over from blast furnaces to electric arc furnaces, is where the whole of the steel-making capacity of Tata in Wales is produced. It is interesting that this 50% of steel-making is not nationalised. It is a working partnership between, on the one hand, the Government—by which I mean two Governments, the Government in Cardiff and the Government here in Westminster—and the company itself. The deal, which was struck only days before the general election, meant that approximately £1.3 billion was to be invested in Port Talbot: £500 million of that came from the then Conservative Government. This Government have honoured it and indeed have gone further by giving about £120 million to retraining and by ensuring that procurement rules have changed, so that British companies must use British steel. To that end, 5,000 jobs are to be maintained in Port Talbot. So, as welcome as this Bill is, we must see it in context. It is only part of the picture: only half of it.

The questions I would like to ask the Minister concern Port Talbot, which this month suffered a severe fire on its site and is facing some difficulties with that. Also, there are hugely important problems with the supply of electricity—and I very much take the points that have been made regarding the cost of electricity. We cannot ignore it as a Labour Government. We must look at it very seriously. Secondly, there are planning issues which have been faced by the company in Port Talbot. These I would have thought can be overcome if my noble friend liaised with the Secretary for Wales and with the new Welsh Government.

At the end of the day, all of us understand that we cannot be without a British steel industry. Nothing is going to be easy with regard to this. There is no easy solution to it. But this is at least a start. It is the right thing to do and it is the British thing to do.

18:50:00

Lord Sikka (Lab)My Lords, this enabling Bill paves the way for a possible nationalisation of steel companies, with a particular emphasis on British Steel, currently owned by the China-based Jingye Group. This nationalisation may or may not happen—we have to wait and see. The Bill allows the Government to transfer the shares or property of a steel company into public ownership, where doing so is in the public interest. The concept of public interest is inevitably highly contested, and competing meanings can be advanced. It would be helpful to have the Minister’s explanation of the detailed conditions that would actually satisfy the public interest test; that might enable us to discuss public ownership of other industries as well.

The Minister’s explanation would help to dissolve uncertainty for workers, suppliers and local communities. Prolonged delay of nationalisation would increase the cost to the public purse as, since April 2025, the Government have already been incurring significant costs to keep the Scunthorpe plant going. I support the public ownership of steel, as it is a crucial input for so many industries. The Scunthorpe plant is the last UK plant producing virgin steel, which is essential for the construction of buildings, railways and critical hardware such as submarine hulls and aircraft landing gear. The loss of the plant would leave the UK as the only G7 country without the capacity to produce virgin steel. A large number of direct and indirect jobs depend on the plant. Nationalisation and expansion of the steel industry would help to expand our industrial base. The Bill raises lots of questions about the Government’s strategy. It would rescue England-based British Steel but allow the Port Talbot blast furnaces in Wales to be extinguished. People in Scotland have still not forgotten the Government’s failure to rescue the Grangemouth refinery. Can the Minister answer the charge of being England-centric? Can he assure the House that once the Scunthorpe plant is nationalised, it would not be re-privatised by a Labour Government?

The Bill also throws up other inconsistencies in the Government’s policies. Nationalisation of steel and rail passenger services is apparently in the public interest, but the same is rejected for water, even though water companies exploit people, dump raw sewage in rivers and are destroying human lives, marine life and biodiversity. Some 120,000 people a year are dying in fuel poverty, but there is no attempt to nationalise energy. Is it that the Government are prioritising corporate interests over the lives of the people?

Part 2 of the Bill establishes a framework for possible compensation for nationalisation. I assume that this would eventually require another Bill. Can the Minister clarify the position? As British Steel is financially insolvent—it is finding it very difficult to survive and its assets probably have no alternative use value—the chances are that any compensation offered for it would need to be fairly low. Any framework for compensation must recoup the £500 million or so spent by the Government to keep the Scunthorpe plant going. The real value of all subsidies and grants must be recovered.

The Jingye site in Scunthorpe is the second-largest single-site source of carbon emissions in the UK. It accounts for approximately 2.2% of the UK’s total carbon footprint. Surely the Government will insist that Jingye makes good the environmental damage before it exits the steel industry. If not, it would be helpful to know why the Government would not insist on that.

As expected, the Opposition Benches have focused on the possible cost of nationalisation and its impact on the national debt. That is really a one-sided argument because through nationalisation, Governments also acquire the assets of the enterprise in question, enhance economic resilience and improve supply-chain security. The tendency of the ONS is to show the net liabilities of publicly owned entities and ignore the assets. It does that for Network Rail, where its liabilities are shown in the national debt but its assets are completely ignored. That practice needs to change. If changed, the ONS calculation must net off a nationalised British Steel’s liability against its assets, which would result in a very small change to any national debt calculation. Can the Minister clarify the position and indicate whether how we measure the national debt would be changed?

The high cost of energy is a major obstacle, as many noble Lords have already indicated. It puts steel- making and other industries at a competitive disadvantage. The high cost is an issue all across households as well. We know that, in April, the Government extended what they called the British industrial competitiveness scheme, which reduces energy bills by about 25% for 10,000 companies deemed to be heavy users of energy. That scheme kicks off in April 2027, although discounts would be backdated to 2026. The scheme is funded by the public purse and is therefore likely to be temporary. In any case, it does not help small businesses, farmers and others who are totally excluded from it.

A bright future for steel-making and British industry requires a permanent reform of energy costs. That would require decoupling the price of gas-produced electricity from the rest, moving all levies to general taxation, and cuts in the profit margins of energy companies. This in turn would require scrutiny of the way that Ofgem calculates the weighted average cost of capital and all the assumptions that are used to generate those numbers. Noble Lords earlier mentioned many countries which have a competitive advantage in energy production, such as France, Norway, Sweden, Denmark, Germany, India and China. What they did not mention was that in these countries, a significant part of energy production is state-owned so, freed from the need to generate profits, they are able to simply break even, taking one year with another. That therefore offers their industries a competitive advantage and lower rates of inflation.

Public ownership of energy must not be a taboo for the UK. It could give the Government more economic policy options and help to address the competitiveness of our industries. I look forward to hearing the Minister’s reply.

18:59:00

Baroness Redfern (Con)My Lords, I thank noble Lords for allowing me to speak in the gap. I congratulate the Minister on his appointment and his opening statement.

As negotiations to resolve are still being discussed, the Bill will not immediately nationalise until the public ownership test is met. But years of underinvestment in our steel industry has resulted in it being neglected, and uncertainty lingers for many skilled Scunthorpe steelworkers and those employed in the supply chain.

Only last April, the House was recalled for emergency state intervention. At the same time, we witnessed a cliff-edge shortage when the Chinese owners halted new orders for coking coal and iron pellets, causing a critical threat that the last blast furnaces would go cold. Since then, it has cost the Government over £1.3 million a day to keep the furnaces running.

To sustain steel-making in Scunthorpe in the future, there will be a transition to two new electric arc furnaces, but that will take several years due to limited preparation and the need for a secure grid connection. The question posed is: how will the Government secure stability for the plant in the short to medium term? Our steel having to compete on an unlevel playing field due to our having the highest energy costs in Europe is one of the greatest barriers to competitiveness and viability for future investment. These costs must be reduced. In their ongoing support of the steel business, the Government must ensure that Bess and Anne are part of that transition. They are proud Scunthorpe queens of virgin steel. They are hungry to keep burning and cannot be left to run cold—as they nearly were last April—and they need further investment now.

There are initial concerns surrounding the scale of the UK carbon border adjustment mechanism while we are still importing nearly 70% of our steel requirements. This too must be reduced for procurement, and we must look at how future UK contracts are managed. We must not, and cannot, be the only G7 nation without the ability to make primary virgin steel. We must not forget that, from defence to renewable energy, steel provides vital material for our national infrastructure and for economic growth, and that it supports our highly skilled specialist workers, who work in the production of our own steel-making.

As the Government put forward this proposal to nationalise a steel company in the short term, they can make their own decisions and, in future, may have the opportunity to include new investors or owners. Above all, our steel sector needs certainty for our dedicated workforce and contractors and for future investments in our industry stretching across the country. For our prosperity, the future has to be “UK steel first”.

19:02:00

Lord Wigley (PC)My Lords, very briefly in the gap, I flag up my support, and that of Plaid Cymru, for the Bill’s general objectives, although we have reservations on some of the detail, which I hope I can pursue at later stages. I also wish the Minister well in his new duties.

Before entering Parliament, I worked for two major steel-using companiesthe Ford Motor Company at Dagenham, and Hoover washing machines at Merthyr Tydfil. Steel was a basic ingredient of both products. When I started working, steel employed over 100,000 workers in Wales. The danger then was of such manufacturing processes becoming vulnerable to new techniques or being undercut by overseas manufacturers. Modernisation was essential. The third quarter of the 20th century saw the nationalisation, denationalisation, renationalisation, and then in the 1980s the privatisation, of steel—hardly conducive to attracting the investment needed to modernise that industry.

At that time, as now, steel had strategic importance in defence policy. Surely that is the real backdrop to this Bill. I accept that, for defence purposes, the UK requires a steel industry that is not vulnerable to commercial or strategic decisions taken by overseas industrialists or Governments, or the whims of financial markets. If steel has that level of strategic importance, all the eggs should not be in one basket. We need at least two or three centres where the capacity, technology and skills are available and not vulnerable to being undermined by physical or cyber attacks.

It is in that context that I view the Bill before us. I have in mind the implications for iron and steel manufacture at Port Talbot. The main reservations Plaid Cymru has about the Bill is whether its powers will be used to safeguard the steel industry in Wales. There is widespread belief that the steel industry at Port Talbot has not been treated on an equal basis with that at Scunthorpe. We do not claim that Port Talbot should have preferential treatment, but neither should Scunthorpe. Both are needed, and both should be developed in a manner that avoids strategic, economic or defence needs being limited to one location. That would be nothing less than strategic myopia and a blunder of monumental dimensions. So the assurance I seek is that the Bill is not the prelude to building up Scunthorpe at the expense of Port Talbot. I will seek to clarify whether the public interest test applies equally to Port Talbot and Scunthorpe, and whether equivalent resources will be available to both Port Talbot and Scunthorpe. Both plants need to be as effective, productive and resilient as each other.

While Port Talbot is the major plant in Wales, other steel locations such as Shotton and Llanwern should be developed appropriately. A diversity of capacity, technology and experience is needed to ensure a steel industry that responds to commercial and strategic needs. At later stages, we may also want to probe how “public interest” is defined. Defence and strategic considerations are clearly within such a definition, but the public interest may extend much further, as the noble Lord, Lord Murphy, implied in his comments a few moments ago. There must also be a provision requiring the UK Government to work closely with devolved Governments in implementing the Bill. I shall be grateful for whatever assurances the Minister can give me, and I look forward to his response.

19:06:00

Lord Fox (LD)My Lords, I join the chorus welcoming the noble Lord, Lord Leong, to his new ministerial role. He has not only got the new role but got it in time to steward this Bill, and the Commercial Payments Bill, through your Lordships’ House. What a time to be alive.

As we have heard, around Easter 2025, the Government pressed the emergency button. They pulled us into Parliament on a Saturday and, as a result, acquired the powers to make decisions regarding the Scunthorpe blast furnaces and prevent its owners running it down. Subsequent events supported the Government’s haste in that movement. To avoid becoming a hybrid Bill, this Bill carefully avoids Scunthorpe. However, I very much doubt that we would have this Bill were Scunthorpe not an issue. It sits there, like Banquo’s ghost, and clearly the Government are having to press buttons in order to take control from the Chinese owners.

So that noble Lords did not have to, I reread my speech from last year. To be honest, I could have copied and pasted large parts of it. In the Saturday debate, I noted that the steel industry’s problems did not start a couple of years ago but were systemic and had been there for a long time. In that regard, I noted the hubris of the Conservative spokespeople—and the noble Lord, Lord Hunt, did not let me down today. There are huge responsibilities for this industry that go back a long way; it is not two years’ work.

I asked how steel fitted into the carbon emissions route to net zero; I questioned the path to electric arc conversion, and, in giving support to that Bill, I said that there needed to be an overarching steel strategy. Well, we have reached the privatisation stage and, to be honest, I am quite surprised it has taken that long. The Scunthorpe plant has been haemorrhaging public money for over a year and the Government have clearly been arm-wrestling with the owners, Jingye.

In 2025, the Government published a steel strategy that had billions of pounds attached to it. In this context, this Bill is part of a very high-stakes exercise that the Government are seeking to run. It is therefore important that there is sufficient scrutiny, both in your Lordships’ House and at the other end, of every move that follows this Bill, should it be passed.

I will use this speech to set the scene. There are four broad issues of concern, and we have heard them raised in different ways: national security, economic resilience, modernisation, and jobs and communities. The justification for protecting the steel industry has always been that it is a strategic asset, not least in that it supports defence, critical infrastructure, wider national resilience and our advanced manufacturing industries. For many years, a contrary commercial argument has preached that most of what we need is available on the open market and is usually cheaper as a result. Clearly, the Bill’s proponents frame it as protecting the country’s ability to make essential materials at home. This turns on the question of sovereignty and readiness. Given the world we live in now, Liberal Democrats side with this sovereignty argument. Going on the world market is no longer a safe option to take us forward.

However, I remind your Lordships that none of what we discuss today can be taken in isolation from the steel tariff regime and the implementation of CBAM, the carbon border adjustment mechanism, nor can success be achieved without the provision of low-cost green energy. I will talk about the first two points and leave energy costs for another day—not because they are unimportant, clearly, but because they do not directly relate to this Bill.

On tariffs, I thank the Minister for his letter clarifying some of the issues, but I question the spirit of his reply, which seems to be that everything is okay in how the tariffs will be pitched. The word from steel users is that it most certainly is not. We are being told that the measures due to come into force in just two weeks, on 1 July, are likely to have a materially damaging impact on downstream manufacturers, with immediate implications for competitiveness, investment and jobs.

Where there are no direct domestic sourcing alternatives, materials for steel users must be imported. However, we are being told that the current commodity code structure is too broad, reflecting some of the issues raised by the noble Lord, Lord Frost. There seems to be a need for a more subtle coding process in the focusing of tariffs. If essential items that cannot be domestically sourced are captured in the tariff regime, this will have a dire effect on industrial users. With tariff-free quotas being reduced by around 60% and a 50% tariff applied beyond those limits, businesses that need those kinds of steel are effectively being taxed on critical inputs, with no ability to substitute domestic products if they are not being made. I think the Department for Business and Trade has received proposals from the industry to remove or move certain commodity codes, make amendments to quota sizes and utilise authorised use schemes. I urge the Minister to respond to this and make sure that the department is fully co-operating with different elements of the supply chain to ensure that what I believe is an unintended consequence does not come back.

Most of the imported steel comes from the EU, and negotiations on this between the UK Government and the European Union are critical. If they reach a successful fulfilment, many elements that are causing problems around tariffs will be eliminated. However, we are homing in on a very tight corner here; as I have pointed out, 1 July is two weeks away and we may have an interim period between an agreement with the EU and the implementation of these tariffs. It would be useful to hear from the Minister how the timing and phasing of this could be achieved and whether putting relief in for a further period until the EU negotiations are concluded would give better certainty to our businesses. We will come back to this in Grand Committee, but that will be another week gone, so it is important to find out where we are going.

Fundamentally, I want to make the obvious point that it is not the manufacture of steel that is strategic, but its use. If ring-fencing steel production using tariffs creates higher costs for our businesses, we are missing the point. It is how we make stuff that is important. We do not just need a secure industry that produces strategic materials; we need it to be cost effective. That is one element of economic resilience.

The Government have said that their actions are meant to avoid a sudden halt in production and provide stability while longer-term options are considered. The nub of that is what the longer-term options are. Although we have a steel strategy, the Government have an awful lot of work to do to flesh out how they see the future of our industry. A key element of that is whether they see Scunthorpe continuing to have blast furnaces or converting to electric arc, as raised by the noble Baroness, Lady Redfern. The Minister and I have discussed substitutability and whether there is a strategic need for blast furnace capacity to keep virgin iron production in the United Kingdom. I would like to hear from the Dispatch Box that, if we are going to all-electric arc provision in the United Kingdom, we will be able to maintain all the strategic needs of steel in this country—as it stands now, not in some future provision where electric arc can be honed and tuned. Can we deliver the steel we want with the knowledge we have now?

The aim is to make the industry investable. Can the Minister explain how this will be achieved? For example, every location will come with a huge environmental legacy. Ultimately, there will need to be remediation, and usually it is the owners of the businesses who have to fund that. Every location has important pensions commitments. The Bill appears to deal with pensions liability only indirectly. I presume that, once it is taken into public ownership, Ministers will have to manage the company’s wider obligations, including pensions, through the rescue or transfer process. Can the Minister expand on that? Both these factors affect investability. Can the Minister explain their attitude to environmental and pensions liabilities in any nationalisation when they are looking for investors? Will subsequent investors in nationalised steel have the opportunity to invest clean of past liabilities, or will they be investing in a business that retains them? Again, I will pursue this topic in Committee.

The Government have said that their aim is not just to preserve the status quo but to create a modern, competitive steel sector. Once again, this legislation is merely a route to explore future options. It is still not the final answer. The Government have rightly emphasised the importance of steel plants for jobs and communities. Nationalisation could preserve many of those jobs, but does the Minister recognise that, in creating that modern, competitive and investable steel sector, there may well be fewer jobs in future? How will the Government prepare those communities now so that they can be made stronger and absorb any changes to employment patterns in their area?

The other important part of this Bill is the inclusion of the public interest test. The noble Lord, Lord Sikka, did my work for me in laying out some of the puts and takes that go into that. There will be tension between the real value of Scunthorpe, whether that is positive or negative, and our relations with the Chinese Government. In that case, where does the balance of public interest lie? How do the Government view this?

Last year, we were asked to approve an emergency stopgap to save Scunthorpe. This Bill is couched in wider terms, devoid of detail and laden with executive powers that could very well leave taxpayers exposed to huge costs and liabilities. That vagueness means it is unclear how it will protect jobs and what the future of steel will look like. Because of this, my colleagues in the Commons tabled amendments seeking to give Parliament more oversight of the developing stages of this paving legislation. We agree that it is important to get on with this, but only with the necessary parliamentary controls. We will retable those amendments.

As a parting point, to echo the noble Lords, Lord Bilimoria and Lord Wigley, nothing in the Bill should be used to put Tata and Port Talbot at an unfair disadvantage, as their transformation reaches fruition.

In practice, the UK steel strategy’s success will depend on whether the prevailing energy costs, the implementation of the CBAM, huge public sector investment, the imposition of procurement and demand measures, and the introduction of import tariffs and tighter controls are enough to make domestic production commercially viable. That is a huge task, and we will have to work together closely to achieve it. It is a mission that we want to succeed and we support the Bill, with some provisos. I look forward to Grand Committee.

19:20:00

Lord Sharpe of Epsom (Con)My Lords, I join the general approval of the Minister’s promotion. I wish him well and I am delighted to face-off somebody who has considerable business experience.

I am grateful to all noble Lords who have contributed to this important debate. It is always a pleasure to follow the noble Lord, Lord Fox, who, when talking about hubris, was slightly selective with his times. The steel industry has had systemic issues for a couple of decades—and there was a Liberal Democrat Business Secretary for at least five of those years. Apart from that, I agreed with much of what he said.

There was a great deal of agreement in the House about the general strategic importance of steel, which is welcome. British Steel matters to Scunthorpe, jobs, rail, construction, manufacturing, defence and our national resilience more generally, as many others have noted. We do not deny that the Government may have had to act in April 2025 to prevent an immediate and disorderly closure of the blast furnaces, but the central question remains, and it runs through the debate. It is not whether steel matters; it is whether nationalisation is a serious strategy for making British Steel viable. On that question, the Government have still not provided convincing answers.

As my noble friend Lady Noakes noted, nationalisation, we were told, was not the Government’s original plan. When the emergency Steel Industry (Special Measures) Bill was brought before Parliament last year, the then Secretary of State, Jonathan Reynolds, told the Commons that:

“The Bill does not transfer ownership to the Government”.

He said that the Government’s aspiration remained

“a co-investment agreement with a private sector partner to secure a long-term transformation ”.—[ Official Report , Commons, 12/4/25; cols. 840, 841.] I have absolutely no doubt that the Minister will say that private investment remains the goal—indeed, the Minister in the other place, Chris McDonald, said as much in a Written Statement—but where is the plan to achieve it? Where is the timetable? Where is the private partner? Where is the route back to commercial viability?

The noble Baroness, Lady O’Grady, referred to the halcyon days of the 1970s—when state ownership worked so well that I have clear recollections of doing my homework by candlelight. In the 1970s, when the Labour Government last ran British Steel, the taxpayer was forced to carry staggering losses. We worry that the danger now is that we will repeat the same mistake, by not solving the underlying problem but moving it from the company’s balance sheet to the public balance sheet.

The central barrier is not ownership; the central barrier is competitiveness. Every speaker in the debate referred to high energy costs. It is the cost of doing business now more generally in Britain. It is the regulatory and taxation environment that makes heavy industry harder here than it is in competitor countries. Yet the Secretary of State for Energy Security and Net Zero appears more interested in driving forward an ideological net-zero agenda than in bringing industrial energy prices down dramatically. I cannot help thinking that, with his messianic zeal, he is doing more damage to the Government’s growth agenda than anyone else in Britain. Instead of cutting bills and taxes, abolishing the UK carbon border adjustment mechanism and giving energy-intensive industries a fighting chance, the Government seem preoccupied with regulating ever more aspects of economic life, from factories to household heating products.

We recognise that there has been a long-standing and serious problem with Jingye. We also recognise that there may now be legal proceedings. I do not ask the Minister to prejudice the Government’s position in litigation, but there are matters on which the House is entitled to clarity. Can the Minister confirm whether Jingye has asserted that, from 12 April 2025, the date on which the Government assumed control of British Steel, neither Jingye nor any company in the Jingye Group has any continuing obligation to British Steel? Can the Minister confirm whether Jingye intends to disaggregate British Steel from Jingye Steel (UK) Holding Ltd and remove assets, liabilities and other British Steel-related items from its own balance sheet? If that is correct, what is the Government’s assessment of the solvency position of British Steel itself?

If British Steel is continuing to trade only because the Government, directly or indirectly, are underpinning its working capital, does the Minister accept that this raises serious questions about the public accounts treatment of the support advanced since April 2025? Does it still make sense to treat that support as recoverable debt if the company cannot repay it without further taxpayer support? Do the Government now accept that, if British Steel continues to trade, the taxpayer may have to assume responsibility not merely for the working capital but for accumulated non-cash losses, balance sheet liabilities and forward obligations?

Will the Minister address the reported intercompany debt position? Jingye has been reported as quantifying outstanding British Steel debt to different Jingye counter- parties at hundreds of millions of pounds. If the Government acquire all the shares in British Steel and the company is not placed into insolvent liquidation, will the Government become responsible for those liabilities? Will the taxpayer be assuming the full built-up losses since 12 April 2025, losing the prospect of clawing back earlier support, and taking responsibility for future liabilities, including the eventual decommissioning of the blast furnaces?

In opening, the Minister talked about the premature closure of the blast furnaces, which the Steel Industry (Special Measures) Act was supposed to prevent. Have the Government commissioned a study of how much life the blast furnaces have left in them? It is important to ask that question and to know the answer, because it will have a material impact on the decommissioning costs, as and when they arise.

Can the Minister confirm whether our maths is correct on this? The National Audit Office has said that support for British Steel is expected to reach £615 million by June 2026, while Jingye is reportedly seeking compensation of more than £1 billion. Once potential compensation, operating support, working capital, administrative costs and future capital investment are taken together, is the taxpayer exposure now approaching £2 billion or potentially even higher? If that figure is wrong, will the Minister set out the Government’s current estimate of the total cost to the taxpayer, including any liabilities that may come on to the government balance sheet on day one of nationalisation? If the assets—a couple of 70 year-old blast furnaces—offset the liabilities, as the noble Lord, Lord Sikka, thinks likely, I have a couple of hats that I will eat.

As my noble friend Lord Hunt of Wirral set out so clearly, the Government came to office promising a £2.5 billion steel fund—a fund that was supposed to transform the sector, modernise production, support new technology and crowd in private investment. Yet there is now a real risk that this money will be consumed not by transformation but by rescue, as my noble friend Lord Redwood pointed out. Money that should have been used to modernise the sector, lower energy costs, support new technology and bring in private capital may instead be used simply to keep one loss-making business afloat. That leads to the question that has been asked repeatedly in this debate: where does this end? Will British Steel, under public ownership, be expected eventually to stand on its own two feet, or will taxpayers be asked year after year to fund operating losses, while Ministers promise that a solution is just around the corner?

The Bill says that the Secretary of State may exercise transfer powers only where he considers it necessary in the public interest. The noble Lords, Lord Sikka and Lord Fox, asked some good questions on what the public interest is and how it is defined. I look forward to the Minister’s answers to those. The Government say that public interest will include considerations of national security, the economy and critical infrastructure, but could Ministers be any more vague when they refer to the “economic interests” of the United Kingdom? Will taxpayer funding be limited or capped, or are Ministers asking Parliament to approve an open-ended commitment? Will the Government be required to show that they have made every reasonable effort to secure private sector investment before nationalisation proceeds?

It was uncomfortable and somewhat ironic to witness representatives of the Chinese ownership and the Chinese Communist Party lecturing the United Kingdom about abiding by market principles—although I note that the noble Baroness, Lady Donaghy, pointed out the irony of that as well. However, the Government must consider the signal that they are sending to international investors. If Ministers seize control, fail to secure a commercial settlement and then proceed to nationalisation without a clear compensation, exit or investment plan, how does that make Britain look to the next investor who is considering committing capital to a strategic industry here?

We also cannot ignore the wider business climate that the Government have created. As my noble friend Lord Hunt and others have made clear, the elephant in the room is the Employment Rights Act 2025. I know that Ministers are tired of hearing about it, but we are not going to stop raising it because it is helping to make the business environment less competitive and less investible. Combined with the increase in national insurance contributions, endless reporting requirements and carbon taxes, the Government are piling costs upon costs and burden upon burden on the very industries that they claim to want to support. For a steel sector that is already operating under intense global pressure, those additional costs are not abstract. They affect hiring, investment, margins, productivity and the ability of British steel-makers to compete. At precisely the moment when steel needs flexibility, lower costs and greater productivity, the Government are increasing the cost of hiring and handing still more leverage to trade unions.

It is no surprise that the unions have called for steel nationalisation. The concern is that the Government have given in to them. How will Ministers ensure that a national security asset is not left at the mercy of industrial action? The Government have removed important strike safeguards. What protections will exist to ensure continuity of supply for defence, infrastructure and critical manufacturing if British Steel is brought into public ownership? Are we seriously to place a strategic industrial asset under state control and then leave it vulnerable to the same union pressure that the Government have chosen to empower elsewhere?

The Government have had more than enough time to tackle the underlying problems—uncompetitive energy prices, rising employment costs, higher national insurance, excessive regulation, the burdens of the Employment Rights Act and the net-zero policy that too often ignores the realities of energy-intensive industry. The steel sector has been operating on a tight margin for years. Nationalisation does not make any of those problems disappear.

In closing, can I ask the Minister to answer the central questionswhat is the total expected cost to the taxpayer? What is the plan for private investment? What is the timetable for restoring commercial viability? What is the exit strategy? What measures will the Government take to reduce the costs that made British Steel uncompetitive in the first place? Without answers to those questions, this Bill is not a serious strategy for steel; it is a costly exercise in papering over the cracks with nationalisation. We urge the Government to come forward with a serious plan—one that lowers costs, attracts investment, protects taxpayers and secures the long-term future of the British steel industry.

19:33:00

Lord Leong (Lab)My Lords, I thank all noble Lords for their contributions to this excellent, thoughtful and wide-ranging debate and for their very kind messages on my appointment. I was trying to count the number of questions asked, but I gave up at 45. I will try to respond to as many as possible within my allocated time. If I am unable to address every point raised, especially those relating to costs and technical issues, I will ask my officials to review Hansard carefully, write to noble Lords accordingly and place copies of those responses in the Library.

The quality of debate in your Lordships’ House is often remarked upon, and today’s proceedings have once again demonstrated the immense expertise, experience and commitment that Members bring to issues of national importance. There have been contributions from across the House and from all sides of the debate. While there may be differences of opinion about the means, there is a remarkable degree of consensus about the end—namely, that the United Kingdom should continue to have a strong and sustainable steel industry. That consensus matters.

Many noble Lords spoke of the challenges facing the sector, and the Government recognise those challenges. They are real and significant, and they are unlikely to disappear in the foreseeable future. As my right honourable friend the Secretary of State has made clear, we are determined to revitalise the UK steel sector, restore domestic production to sustainable levels and secure the industry’s long-term role in supporting economic growth. That means reducing industrial costs, which I will come back to later. It means supporting investment, modernising production and creating the conditions for a competitive and sustainable industry. It also means ensuring that government has the tools necessary to act when that strategically important steel-making capability is at risk. It is about ensuring that future generations continue to benefit from a British steel industry capable of supporting our economy and security.

The noble Lord, Lord Sharpe, asked about the company Jingye and the ownership of British Steel. While we are strongly minded to use the powers in the Bill to nationalise the company, no decision has been made and any decision will be subject to the public interest test. The Government have been providing ongoing funding to British Steel under the Steel Industry (Special Measures) Act 2025. We are publishing regular updates to Parliament detailing this funding. These funding arrangements will be set out in the department’s upcoming annual reports and accounts. We are committed to transparency on this issue.

On the point raised by the noble Lords, Lord Hunt and Lord Sharpe, for whom I have the greatest respect, blaming workers’ rights for unemployment is a caustic distortion of the real issue. It substitutes ideology for evidence and seeks conveniently to scapegoat, rather than confronting the structural changes that hold back employment. Fair pay and basic protections are not obstacles to growth; they are the foundations of a stable, productive labour market. Businesses that invest in their workforce through training, progression and decent terms tend to achieve stronger retention, higher productivity and better long-term performance. Responsible capitalism reduces the need for state intervention. However, where short-termism prevails and workers are treated as a cost to be squeezed rather than an asset to be developed, government has a legitimate role in setting fair minimum payments.

The noble Lords, Lord Hunt, Lord Bilimoria and Lord Fox, and my noble friend Lord Murphy raised the issue of tariffs. The Government support free and fair trade, but trade must be fair. Free trade does not mean surrendering British jobs to subsidised foreign competitors. It means ensuring that British firms compete on a level playing field, not with one hand tied behind their backs. British steel producers should not be expected to compete with heavily subsidised imports, dumped products or unfair trading practices that distort markets and undermine domestic production. Every major steel-producing nation takes steps to protect its industry from unfair competition. The United Kingdom cannot be the only country to leave its producers exposed while others actively defend their national interests. This is why we will continue to use the full range of trade remedies available to us, including tariffs, where justified, to ensure a level playing field, safeguard jobs and maintain British sovereign capability to produce steel.

The noble Lord, Lord Bilimoria, asked about the UK-India free trade agreement. The noble Lord will know that we are seeking to bring this deal into force as quickly as possible. We are working with India to ensure that all parties have taken all the necessary steps to bring the deal into force.

The noble Lords, Lord Redwood, Lord Bilimoria and Lord Fox, and my noble friend Lady O’Grady, raised points regarding green steel and electric arc furnaces versus blast furnaces. The Government are clear that the future of the steel industry is green steel. Electric arc furnaces in the UK are making the full range of steels, from commodity construction grades to stainless steel and specialised steel for defence and nuclear industries. There are still challenges in certain areas such as packaging steel, but we are confident that the industry will find the right solutions. If it would be helpful, I can arrange for a technical briefing on this point for noble Lords who are interested in this area.

Several noble Lords asked about energy-intensive industry. The British industry supercharger seeks to address this crucial issue, providing targeted relief to qualifying sectors to improve competitiveness, safeguard manufacturing and support decarbonisation objectives in the UK. From April 2026, the level of compensation offered by the network charging compensation scheme was increased from 60% to 90%. Reducing electricity network connection timescales is also a high priority for the Government. We are working very closely with Ofgem, the electricity system operator and network companies to accelerate network connections.

The noble Lord, Lord Bilimoria, asked about the transformation of British Steel and the noble Lords, Lord Hunt and Lord Frost, asked about the future of British Steel under public ownership. The Government’s ambition is straightforward: we want British Steel to become a successful and sustainable British industrial champion that the entire country can be proud of. Should public ownership proceed, it would provide the opportunity to take a longer-term view and put in place the leadership, governance and investment necessary to secure the company’s future and safeguard domestic steel production. We believe there is every reason to be optimistic. British Steel continues to have highly skilled workers, valuable industrial assets and significant commercial opportunities. Recent contract wins, as I mentioned in my opening speech, demonstrate that there remains strong demand for British steel and that the company has an important role in the future of our economy.

Several noble Lords asked questions on jobs. I fully understand those concerns. The Government’s objective is a sustainable steel industry capable of standing on its own two feet. That is the best guarantee for long-term employment and stability for workers and their families alike. The decisive action taken by the Government last year prevented the immediate loss of approximately 2,700 jobs and ensured a continuation of steel production in Scunthorpe. We recognise that the sector is evolving and that future technologies will shape the future of steel-making. That is why any transition must be managed carefully. It must support workers, protect communities and preserve our economic resilience. The Government will continue to work closely with trade unions, employees and local stakeholders through the process.

The noble Lords, Lord Wigley, Lord Bilimoria and Lord Murphy, asked about Port Talbot. The Government have no plans to acquire any other steel undertakings, but the Bill provides flexibility to intervene if a future need arises and the public interest test is met. The Government remain fully committed to securing the long-term future of steel-making in Port Talbot through Tata Steel’s £1.25 billion transition to a state-of-the-art electric arc furnace supported by up to £500 million of government funding. The noble Baroness, Lady O’Grady, and the noble Lord, Lord Fox, asked questions on the EU. The global context has changed drastically since Brexit. We need a closer economic relationship that protects our collective industrial security. Both the UK and the EU are taking measures to improve the security and resilience of key sectors. We both face the same challenges, such as overcapacity and higher tariffs, which are distorting global markets. The historic UK-EU summit last year was the first of our annual summits that will take place to improve our diplomatic, economic and security co-operation following Brexit. The date of this year’s summit will be announced in due course.

The noble Lord, Lord Fox, asked about the chilling effect on investment. Let me address this head-on: the Bill does not create any chilling effect on investment. I can do no better than to quote my friend the Minister in the other place:

“We have carried out a very careful balance with this Bill to ensure that the steel industry is fully informed, understands our intentions and is supportive—and it is supportive ”.—[ Official Report , Commons, 21/5/26; col. 812.] The Bill is explicitly framed as a targeted, last-resort response to a market failure. The Government are signalling that it is not intended for wider or frequent use, which narrows uncertainty to a specific context rather than the sector as a whole.

The noble Lord, Lord Redwood, asked about the environmental liabilities, and rightly so. Many environmental liabilities arise on closure. Government intervention is precisely about avoiding disorderly shutdown and managing safely the remediation, respectively.

Several noble Lords raised the issue of compensation. The Government are committed to respecting business rights and ensuring fair treatment. To be absolutely clear, the Government’s actions to date at British Steel, and any future actions, are solely about commercial reality and delivering our domestic steel strategy. They would not differ under an owner of any nationality. If the transfer powers in the Bill are exercised, a compensation scheme would be established to consider and pay compensation for any losses suffered by those affected. An independent valuer would be appointed to oversee this process and determine what compensation, if any, is payable. There is nothing to prevent an outcome of nil compensation, but this would be a decision for the valuer and would depend on the circumstances.

Let me address the issue of nationalisation, which was mentioned by the noble Baroness, Lady Noakes, and the noble Lord, Lord Sharpe. We propose this nationalisation on principle. Are other Peers prepared to accept the loss of the United Kingdom’s last remaining primary steel-making capability in the name of market purity? We believe in free markets, but no responsible Government can stand aside when a strategically vital industry and national security are at risk. This is not ideology; it is pragmatism. Every major industrial nation supports its steel industry. The question is not whether Governments intervene but whether they are willing to act in the national interest where circumstances require. Faced with the choice between preserving British steel-making and watching it disappear, this Government chose action. The promise of privatisation was that private ownership would deliver greater investment, stronger productivity and better outcomes for consumers and taxpayers, yet too often we have seen the opposite, with underinvestment, short-term decision-making and strategic national assets left vulnerable when market conditions turned difficult. The reality is that, when privatisation succeeds, profits are privatised; when it fails, losses are socialised. Working people lose their jobs, communities pay the price and taxpayers are asked to step in. That is precisely why this Government are prepared to act when a strategically important industry such as steel is at risk. When the national interest is at stake, standing aside is not a responsible option. I commit to writing to the noble Baroness about the classification of British Steel—my officials will definitely write to her. We will provide annual reporting to Parliament on financial support, as is provided under the Bill’s powers.

I turn to Port Talbot, as mentioned by several noble Lords. The fire at Port Talbot was successfully contained and all personnel are safe. We will continue to monitor the situation closely while investigations are ongoing and the company moves from emergency response to recovery planning. Regarding grid delays, timelines are still evolving and are not yet finalised. We remain fully committed to securing the long-term future of steel-making at Port Talbot and are working closely with all parties involved to identify mitigations and explore options to accelerate delivery.

The noble Lords, Lord Sikka and Lord Fox, asked about the importance of foreign investment and our relationship with China. I wish to be clear that the Government have decided to introduce this Bill regardless of the nationality of the firm that owns British Steel, which is Jingye currently. The Government continue to welcome Chinese investment in the UK and do not consider the situation at British Steel to reflect our wider relationship with investors.

British Steel is a strategic asset, as I said earlier, for the UK’s steel production. It is critical to national infrastructure and to the local economy. Unfortunately, the Government could not find a way to save British Steel’s operation under its current ownership. Although this Government now need to take steps to secure UK steel capability, we are committed to doing so in a way that respects the rights of business.

Throughout this debate, one theme has recurredthe future of steel matters. It matters to our economy; it matters to our industrial base; it matters to our national security; and it matters to the communities whose lives have been built around steel-making for generations. The Bill before your Lordships’ House is not about preserving the past; as I said in opening, it is about securing the future. It is about ensuring that Britain retains the sovereign capability to produce steel. It is about creating the conditions for a modern, competitive and sustainable steel sector. It is about demonstrating that, when strategically important national capabilities are at stake, this Government are prepared to act.

Today, your Lordships have the opportunity to send a clear message to steelworkers, industry investors, and the country that Parliament remains committed to the long-term future of British steelmaking. I am grateful to all noble Lords for their contributions and for the constructive spirit in which this debate has been conducted. I look forward to continuing those discussions as the Bill progresses. I beg to move.

Bill read a second time and committed to a Committee of the Whole House.