Q68 Phil Wilson: Where would you get the steel from? The slab can be used for anything, from what I understand.

Chairman: Could David Anderson add to that before you answer?

Mr. Dave Anderson: I'll let you answer that question, if you don't mind.

Jon Bolton: We have to go back again-sorry to keep pulling you back-to 2003. The steel from Teesside has predominantly been used outside Europe, and recently, the external markets for Teesside steel have been in south-east Asia. We essentially export the slab. As I mentioned earlier, low-carbon industry will provide opportunities for the remaining footprint in the UK and mainland Europe. Essentially, it is an opportunity to offset some of the reductions that we've seen, particularly recently in the construction sector, and the challenges we are facing in other parts of Corus-that is where the low-carbon industries will feature.

Q69 Phil Wilson: You have a confidentiality issue, which obviously you can't talk to me about. But if you have those potential plans down the line, is it not a bit premature to think about closing this site, if in a couple of years' time, for example, there is a great need for this steel, considering that you'll end up probably having to export it or bring it from other sites within the UK?

Jon Bolton: No. Looking at the potential demand, we wouldn't anticipate having to import. It would help us optimise our operations in the UK. As I say, at the moment all the steel from Teesside is exported, so we don't anticipate that that would be an issue.

Q70 Mr. Dave Anderson: I just wanted to pick up on what Phil asked. You said that all the steel is exported, and that you are unsure of the time scales. Last week, the Government announced the bidders for the offshore turbines, of which there will be at least 6,000 offshore. The demonstration plants for CCS will be announced this year, at least three of which are on the east coast-one just up the road from Teesside. Surely that's a new market that the Teesside steel could have covered.

Jon Bolton: If you look at the rest of the units in Corus, they are being under-utilised at the moment. If you look at the situation we faced over the last two years-again, going back to the autumn of 2008-there was significant reduction in output from all the steel plants in the UK. Our current view is that the potential growing market, which again is a positive move in the UK, would help us secure the remaining businesses in the UK.

Q71 Mr. Dave Anderson: So what? Teesside is being sacrificed to support the rest of the industry?

Jon Bolton: No, that is incorrect. Let's remember, Teesside is in the situation it's in because we lost 80% of our turnover, and the slab from Teesside is destined for our businesses that have a need for that amount of slab. We don't need that quantity of slab in the UK and Europe.

Q72 Mr. Dave Anderson: Is where you are now a direct result of poor decisions taken in the past, including shutting the plate mill in 2001?

Jon Bolton: It's difficult for me to comment on decisions that were taken in the past.

Mr. Dave Anderson: You have been talking about one or two of those-

Jon Bolton: No, if I go back to an earlier answer, plants that have rolling mills on their steelmaking facilities and added value potential attached are in a stronger position.

Q73 Mr. Dave Anderson: If Teesside was able to co-operate with mothballing, would you need to build a new mill to make it viable and sustainable in the future?

Jon Bolton: Again, the conditions that need to exist for Teesside to be borne out of a mothball are a ­positive market environment generally and someone who has a need for 3.2 million tonnes of steel and who is willing to invest in the business.

Q74 Mr. Dave Anderson: Can you advise us? There was a lot of comment made on Friday about why Tata Corus decided to turn to the second blast furnace in Port Talbot, when you actually had the availability at Teesside to cover what you need.

Jon Bolton: It is referring again back to the earlier answer. If the market for the downstream products that are produced by Port Talbot increases, it makes more economic sense to supply the steel for those mills from the site itself. If you look at the conversion costs between ourselves and south Wales, they are roughly the same, but then you have to add transport and energy costs on top of that. So it does make more sense for the plants that have an increase in demand to supply that steel locally.

Q75 Mr. Dave Anderson: I would feel a bit more happy with that answer if you hadn't just told us, effectively, that as and when we start exploiting the green business in the North East you are going to be transporting steel right around the continent to come to the North East. That is basically what you have just said.

Jon Bolton: No, there is a difference between transporting a semi-finished product and transporting a finished product. Assuming, and I hope, that those industries are based on the Teesside region, if that is where they are, the likelihood is that the product required to supply them will be a finished product supplied from other mills.

Q76 Mr. Dave Anderson: Was the TCP plant profitable in the months before the decision to mothball it was taken?

Jon Bolton: The first decision, or the second decision?

Mr. Dave Anderson: The second decision.

Jon Bolton: In the final quarter of last year, the business was making a slight profit.

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Q94 Mr. Dave Anderson: Two things have happened in the recent past that have an impact on this decision. One is that you decided to keep the coke ovens open. Clearly, you'll be making money out of that. Can you tell us how much money, where it will go and whether it could be used to cover the wage bill of the work force left at Teesside? Can you also comment on the debate that's been going on about the emissions allowances? Your company could get over €63 million if it trades its allowances this year. Clearly, both of those depend on the steel works not producing steel. Can you comment on what will happen to the coke ovens, where the money will go and whether there's any reality to the emissions allowance money?

Jon Bolton: The coke ovens must stand alone as a business. It becomes a coke business in its own right. Again, it is difficult for me to comment on the commercial aspects of that decision, because-

Q95 Mr. Dave Anderson: With respect, Jon, I thought that was why you were here. We asked before why Kirby Adams wasn't here. If you can't give us the answer, should we not have had somebody who could?

Jon Bolton: With respect, Kirby Adams, if he were sat here, would not be able to answer those questions, because it's subject to commercial contract. It's not something that we could comment on. Suffice it to say that obviously, the most important thing, and the reason why I am here, is to look at how we can support the region and what we can do to offset the potential partial mothballing of Teesside Cast Products and the effect on the regional economy.

We are talking about a specific here which is actually a positive to the regional economy. We have been able to put a business case together that will enable us to employ over 120 people on the plant and-hopefully, and obviously subject to market fluctuations, as all such decisions are-to make a success of running a coke business on Teesside.

Q96 Mr. Dave Anderson: It's also quite a success for Tata as well, though. That quota would have gone into the jobs at Teesside. It's now going to go into the open market and make money for Tata, so you're going to make money because the place is shut. You're also potentially going to make money out of the ETS. Is that going to happen?

Jon Bolton: I understand the point you're trying to make, but I think that from a Tata-Corus perspective, Tata-Corus has a responsibility to many regions in the UK and the world. The best way they can support those regions and fulfil, if you like, their social responsibility is to have a successful business model. It is important that the businesses we continue to run make money.

On the comment on CO2, obviously, there's been much speculation in the press. The numbers that have been quoted in the press have been considerably wide of the mark, but it is true to say that because of the European Union trading scheme, for a plant to operate, we have to be allocated by regulators an amount of CO2 allowances. It is, if you like, almost a licence to operate that we have those. We will find out in February whether we have. We assume we'll have the allowances we need to operate this year, and a view will be taken at the end of this year as to what allowances we needed to run the plant. Remember, we still need CO2 allowances to run. They are allocated by site, so we need them to run the beam mill, the coke ovens and the power station that remain.

However, you are correct that the company has the ability to trade those allowances. That is a feature of the trading scheme. Depending on the value of those, how much money can be raised from that depends on the value of the allowances at the time they're traded.

Q97 Mr. Dave Anderson: Can I ask if you've looked seriously at the alternative put forward by the union community about transporting steel from TCP to Llanwern? Is that something you would pursue?

Jon Bolton: It is something we have considered in the past. We can look at it again, but it needs to be considered in the context of the overcapacity in the European market. For slab, we need hot-rolled coil. If we take slab to a rolling mill elsewhere in the UK-in this case Llanwern-it obviously incurs an additional cost to do that. That assumes that you have utilised all the capacity available in south Wales before you do that. But then you are reintroducing more volume into a market where there is already overcapacity.

Q98 Chairman: We are led to believe that Corus has underused the strip mill in Wales and that it is probably operating well below 50% of its capacity. This obviously gives Redcar steel-Corus-Tata Redcar-the opportunity of supplying with the belief that the demand for steel over the next 18 months will increase. It is not a vast increase, but it is an increase in demand. We cannot understand why if that is the case, Corus Redcar has not looked at this option.

Jon Bolton: No, it is not true to say that it hasn't been looked at-indeed, it is something that used to happen. Again, it has to be considered in the context-I am sounding like a broken record here-of the overcapacity in Europe. The capacity at which we operate plants has to be matched to the economic demand for those products. If there were a sudden demand for those products and the market suddenly became attractive-our view is that it won't-there would be an opportunity. But, as I say, we are operating in an environment where the customer base for those products is Europe. We are trying to operate the rest of our plants at full capacity. As was decided in 2003, we don't see a viable long-term market for the 3 million tonnes of crude steel supplied from Teesside.

Q99 Mr. Dave Anderson: Has a plant of this size anywhere been mothballed successfully before?

Jon Bolton: Our plant, which I guess you are referring to, is unique. We have a single blast furnace, which is the second largest in Europe. If you go back to, again, autumn 2008, a number of blast furnaces were mothballed around the world because of the sudden decrease in demand. So even blast furnaces in the UK, in south Wales, in Scunthorpe and in IJmuiden were mothballed, but for a shorter period. In the time scale we are talking about, I am not aware of any, but that doesn't take away the fact that we are mothballing this plant and it will be able to return.

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Q114 Mr. Dave Anderson: Notwithstanding what we've heard from Corus, which does not seem, in my view, particularly interested in getting any aid from the Government to keep this place running, what advice have you had that state aid is not available to keep the plant producing steel?

Mr. Brown: There are things that the Government can do, but the first thing that you need is an operator that wants to keep the plant going and is looking for assistance to do so. In other words, you need an owner-operator who has a short to medium-term plan for the business. In those circumstances there are things that Government can do. We are allowed, for example, to give support for training, and a £5 million package was offered to cover that. If we were in a position where the sort of support that the Government could give would be the make or break between the company being a going concern and having to consider mothballing the plant, then I would fight like mad to make sure that we got the assistance there.

I know that people always say, "Well, the EU and the prohibitions that we have all agreed to are an insuperable barrier", but I am not sure that that would turn out to be the case if there was an operator that wanted to keep it as a going concern. I would certainly fight our corner.

Can I say something to the Committee based on my experience as Agriculture Minister? I think it is a mistake to demonise the EU and always to say that the EU is the obstacle. We had very tricky issues to deal with in my three years as the Minister and I found dealing with the Commission something that was comfortable to do. They understood the issues, not just in commercial terms, but also in terms of communities-the people who relied on the industry for their employment base. They also understood all the wider social ramifications as well. If they could find a way forward, I found them amenable to discussion. I wouldn't want the Committee to get the view that it is somehow the EU that is the barrier to support. I am not at all convinced that that is so. The difficulty we are faced with is effectively the marketplace one and the difficulties the company is having in finding a commercial way forward.

Q115 Mr. Dave Anderson: Perhaps we can park the business for the moment. From our point of view, we need to be clear that the Government have done everything they can to support us. I have no doubt that they have, but in a Westminster Hall debate in December, the Minister, Mr. McFadden, basically said that the Government would not be able to keep the business open, because of state aid rules. On Friday, we heard from a number of witnesses who said that that has not been the plan in places such as Germany, Holland and France, albeit they might use different legislation from us. Also, one of our MEPs, Stephen Hughes, said he believed there were ways that we could actually tap into. Is anybody looking at that? Has anybody taken specific advice about whether the situation would be blocked in any way by state aid rules? It seems perverse that we are advised by the Government Office for the North East that you can get European aid to close a plant, but not to keep it open.

Mr. Brown: I am not sure. You would have to have somebody who wanted to operate the plant as a going concern-that is the fundamental point-and had some reason for doing so. So you would need someone who knew that they had an outlet for the product, maybe as part of a supply chain, and security. It is those sorts of areas that need to be discussed first. If there was something that the Government could do to make the arrangement work rather than fail, I would be willing to fight our corner to try to get that gap bridged. I don't want to overstate it-there is a limit to what can be done. I do not accept that somehow the state aid rules alone are an insuperable obstacle.

Q116 Mr. Dave Anderson: What I am concerned about is that we have not explored that package. We are talking about senior Ministers going to talk to people in India. They can go to people in India and say, "Look, we know we can do this if you will do that;" at the minute, from what you are telling us, they will go to India and say, "Well, you do that and we'll go away and see if we can do this," which might be the deal breaker.

Mr. Brown: I cannot think of an issue that should be explored that has not been explored. Is there something specific you want to put to me?

Mr. Dave Anderson: I want you to give us a way forward that I don't know. If I had that answer, I wouldn't be asking the question.

Mr. Brown: We are trying very hard to find a way forward right at the top of Government, but it would be irresponsible of me to suggest that the prospects of succeeding were anything other than a long shot.

Q117 Mr. Dave Anderson: Is that because of state aid rules or not?

Mr. Brown: I am quite happy to come back, maybe when this period is over, to talk more fully. But it is my impression-I may turn out to be wrong-that it is not the state aid rules that are an insuperable obstacle, but the workings of the marketplace.

Mr. Dave Anderson: I am really glad to hear that, but it contradicts what we were told on 16 December in Westminster Hall about what was responsible.

Mr. Brown: I did not attend the debate. I am just giving you my impression, but I may be wrong. I repeat that if there was something reasonable and proportionate that we could do that would make the difference, I would fight for it. I do not believe that the European Union would be completely obdurate. I think they would take into account the need and special circumstances of the community, as well as the surrounding circumstances and the impact of the job losses. That is the most obvious point.

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Q138 Mr. Dave Anderson: Can you be a bit more specific about the areas where you expect the 3,000 jobs coming up to the North East to be created?

Mr. Brown: There are two really strong strings to the bow. One is the neighbouring Wilton chemical complex where there are some prospects. The other is making effective use of that part of Corus's land that is not being used for the steel industry. If that land could be reclaimed and brought back into use, there are a range of prospects, such as the new North sea operations: fabrication work for offshore wind and the possibility of decommissioning as well as commissioning some of those great installations that are now reaching the end of their life in the North sea. All those possibilities are being looked at. My call to One NorthEast and indeed to everyone involved in this, is to firm up the proposals and get a clear sense of direction as quickly as we can. But these industries are all labour intensive.

Q139 Mr. Dave Anderson: Who are the partners you have worked with?

Mr. Brown: I don't want to get into things that are commercially confidential. I am not sure what is in the public domain and what is not, but work is going on, with reasonable prospects of success. The sites will have to be restored first though-there is clean-up work to be done. Even if ownership changes, they will then have to be cleaned up, which is why it is going to take time.

Q140 Chairman: So, from your understanding of the clean-up of the Corus land, is that the responsibility of Tata Corus?

Mr. Brown: That is one of the things we are talking about. It would affect the sale price.

Q141 Mr. Dave Anderson: The Mayor of Middlesbrough put it to us on Friday that this was all about political will or, as he sees it, lack of political will. He quoted the fact that in 1984 the Government had the political will to destroy the coal mining industry. Now we have a Government who are committed to doing whatever it takes to defeat terrorism. Would you agree with him that the Government do not have the political will to do what it takes to save Corus?

Mr. Brown: I most certainly would not agree with that proposition. I am just trying to remember what he was doing in 1984. [Interruption.] If anyone has a decent suggestion they want to make, and says to me, "Pursue this, and it might help the situation," I am up for it. It is not my job to give in.

Q142 Mr. Dave Anderson: I just want to raise the issue that is raised constantly with us-you will have heard this elsewhere. We stepped in to save the banks, we nationalised Northern Rock without compensation, we bent European rules on TSB Lloyds. Why is this different? Why is it okay to look after fat cats in the City, who then go and stab us in the back again? These good people up there have done the business and made a profit-I just wonder why we let them go to waste.

Mr. Brown: I am a Labour MP too, and I do hear that a lot. The answer, hard though it is, is as follows. The debt crisis, which started in the United States and rushed around the world as a liquidity crisis, with each bank not sure what the other bank had and them stopping trading with each other, had the potential to tip not just this country but the whole of the developed world's economy into a recessionary spiral, which could have been even worse than what happened in the late 1920s and early 1930s. We have constituents who can remember what the 1930s were like. They were not called the "hungry '30s" on Tyneside for nothing. Letting the banking system collapse, which is what some people say should have happened, would have been disastrous. The people who would have felt the backlash of that disaster most would have been people of ordinary, or less than ordinary, means.

I strongly believe that the Government, unpalatable though it is, did the right thing in stepping in to underpin the banking system. It was a private sector failure, but the state stepped in-not because we wanted to, but because we had to. Why did we have to? Because the consequences of not doing so would have been very much worse. We are not the only Government to have taken that point of view. Right the way around the world, different Governments of different political characteristics came to the same conclusion. We all ended up doing the same thing. I suppose the exception would be the Bush presidency in the United States, which decided not to intervene in Lehman Brothers. There are those who would argue that even just not intervening there made the situation worse, rather than better. In retrospect, one wonders whether he would have taken the same decision again.

That is why we stepped in for the banks. You say, "Why not everything else? If we can do it for one thing, why not do it for another?" I know the British Government are underpinning quite a lot of economic activity in this country at the minute. The same will be true of other great nation states. But there is a qualitative and quantitative difference between the banking system and individual, very practical operations, such as the steel industry, the shipyards and coal mining, which we are familiar with. They are not the same thing.

Q143 Mr. Dave Anderson: What would you say about the failure of the private sector in this situation? Earlier, we heard quite clearly that the private sector company involved here does not want to find a way out, and it did not get one.

Mr. Brown: I understand what you are saying, but I am not sure that I would go that far yet.

This is an uncorrected transcript of evidence taken in public and reported to the House. The transcript has been placed on the internet on the authority of the Committee. Neither witnesses nor Members have had the opportunity to correct the record. The transcript is not yet an approved formal record of these proceedings.

The full transcript may be read here.

Promoted by Paul Foy on behalf of Dave Anderson, both of St Cuthbert's Church Hall, Shibdon Road, Blaydon, NE21 5PT