The government did nothing to avert the Tata Steel crisis

"Our EU competitors support their industries in ways that we do not support ours"

April 01, 2016
Workers wait to speak to Business Secretary Sajid Javid as he leaves Tata Steel in Port Talbot, South Wales, as the Government outlined its response to the crisis gripping the steel industry. Ben Birchall/PA Wire/Press Association Images
Workers wait to speak to Business Secretary Sajid Javid as he leaves Tata Steel in Port Talbot, South Wales, as the Government outlined its response to the crisis gripping the steel industry. Ben Birchall/PA Wire/Press Association Images

Read more: What the Tata Steel crisis tells us about Brexit 

There is no doubt about it: the government has been asleep at the wheel in the face of an oncoming crisis. As my Labour parliamentary colleagues Stephen Kinnock, Stephen Doughty and Anna Turley—all of whom represent steel industry communities—have pointed out, it wasn’t as if the government didn’t know that the events of the last few days were a possibility. The Tata Board meeting on 29th March in Mumbai had been in the diary for months. Tata Steel's board member Koushik Chatterjee underlined this when he told us this week that the company had kept the UK government constantly informed of the realities of the situation.

What is at stake? Tata Steel’s UK business employs 15,000 people with a further 25,000 estimated to be employed in its supply chains. Their largest plant is in Port Talbot, South Wales, with around 10,000 direct and indirect jobs at risk. All these jobs could be lost if no buyer is found in the next few days. Of course, it is not only the jobs, but the knock-on impact on UK manufacturing that needs to be considered too.

The question now is what should be done? UK Steel, the industry body, has made a number of requests, one of which has been met, but the others which sadly the government has failed to meet. They asked for the Energy Intensive Industry Compensation Package, to help with cost of energy, to be fully implemented and as quickly as possible. EU state aid approval for this was granted at the end of last year, but the Treasury took far too long to secure this deal.

UK Steel also asked that business rates for capital intensive firms be brought in line with their competitors in France and Germany, given that UK companies are currently paying between five and 10 times more than their EU competitors. However, no concrete action was taken on this in last summer’s Budget, last year’s Autumn Statement or last month’s Budget.

It also asked for the government to consider making derogation requests to meet increased commitments under the EU’s Industrial Emissions Directive. As usual, the UK government’s propensity to gold-plate EU legislation appears to have got in the way of any action being taken.

But worst of all is the government’s opposition to attempts at an increased EU tariff level on steel, to match the aggressive approach of the US government towards Chinese “dumping” of the material. As the Chinese have switched from spending on infrastructure towards consumption, they have a huge over-supply of steel which they are selling at a lower cost and often at a loss in other markets. In response the US has slapped at 236 per cent tariff on Chinese steel and a 256 per cent anti-dumping duty in relation to corrosion resistance steel. The EU has not been as draconian—principally because the UK won’t entertain it, according to reports.

The head of the European Steel Association, Axel Egert, could not be clearer: “the UK is the ringleader in a blocking minority of member states preventing a European Commission proposal on the modernisation of Europe’s trade defence instruments.”

This was corroborated by the French Economy Minister, Emmanuel Macron, who fingered the British government as responsible for standing in the way of tougher measures against Chinese dumping after a meeting of the EU Council on 29th February. The Brexit brigade have used this issue to argue that we should leave the EU, but the fault here is very much domestic.

So, contrary to what Messrs David Cameron, George Osborne and Sajid Javid (who visited Port Talbot today) claim, this government is not taking all necessary measures to save this very important industry—despite it being in the national interest to do so.

It is important that we have our own foundation industries and don’t simply rely on imports from abroad, but if we want them to thrive then we need to give them better support. I don’t believe this means propping up a failing business because in this case our steel industry has potential. However, as the Institute for Public Policy Research (IPPR) has pointed out this week, our EU competitors support their industries in ways that we do not support ours. As the IPPR argues, if you look at the evidence on research, development, productivity and investment performance, the UK lags behind our competitors. There is definitely a role for government here. Through a properly executed industrial strategy, it should work in partnership with the sector to help firms to improve.

In the short term, a buyer needs to be found for Tata Steel’s UK business. To facilitate a transition to a sale, temporary public ownership should not be taken off the table (though Sajid Javid appears to have done just that). If the business were to close this would involve huge costs, obviously for communities that would be devastated, but also for the Treasury, which would need to provide subsequent support to help those communities rebuild.

Above all, the kind of “dumping” we do need to see is of the failed, laissez-faire Thatcherite ideology that has meant a whole sector has been left high and dry by this Tory administration.