TATA steel

There is a limited number of options available when it comes to the closure of the Port Talbot steel works. None of them are particularly easy or necessarily attractive, but here they are:

  • Abolish taxes on energy. It’s interesting to note that many of those lamenting the loss of steel jobs have fallen victim to a strange amnesia, forgetting the years during which they themselves supported the introduction of various taxes and other policies specifically intended to increase the cost of energy. For the green movement, the destruction of high energy, and therefore high carbon, industries and the jobs that go with them is a notable success – a success they are now loathe to lay claim to. Various economists and industry figures did warn that deliberately increasing the cost of energy would cost jobs, but they were ignored. They also warned applying these measures in the UK alone would export those jobs to countries with far greater emissions, like China, defeating the greens’ professed objectives, but they were ignored on that as well. The defenders of green taxes now argue that the cost of such policies is “just” two per cent on operating costs – but the EEF point out that in a troubled industry functioning on “razor thin” margins, that’s more than enough to do serious damage. Scrapping measures which artificially increase the energy price might not solve the whole problem, but it certainly wouldn’t hurt.
  • Introduce tariffs. It’s been widely pointed out that the biggest factor in the decline of British steel is competition from low-priced – indeed, loss-leading – Chinese steel. America, we are told, enforces tariffs of over 250 per cent on imported steel in order to protect jobs in its domestic industry – should we do the same here? To start off, we can’t. We literally aren’t allowed: every single person in the country could sign a petition for tariffs, and it would still not be allowed to happen because trade policy is a power we have given away to the EU. (If people who supported green taxes and now lament the demise of a high energy industry aren’t hypocritical enough, add in the hypocrisy of demanding tariffs while backing a vote to Remain in the EU.) More important than that, though, is that tariffs would be hugely damaging to the wider economy. Introduce a steel tariff to protect steel workers, and you would destroy jobs in car manufacturing, construction and various other sectors which use Chinese steel – and that’s before we consider the possibility that China would introduce revenge tariffs against our exports. Swapping jobs in successful industries to protect jobs in loss-making ones is not a good deal.
  • Nationalise Tata Steel. Once upon a time, nationalised industries were common in this country – they were inefficient, costly and wasteful, and the burden of sustaining them hobbled enterprise in the rest of the economy. It was a huge battle to end the practice, but the dividends of doing so can be seen in the fact that we are vastly better off now than we once were. However, the current crisis has seen nationalisation advocated not just by the usual suspects but by two Tory MPs – Tom Pursglove and David TC Davies, perhaps surprisingly given they are both on the record as great admirers of Thatcherism. The problem with the idea is both simple and obvious: Tata Steel loses £1 million a day. Nationalisation would require taxpayers to foot a large bill apparently without end. Given the need for deficit reduction, and the pressure on other aspects of public spending as a result, that cost can’t be justified. Furthermore, as Sajid Javid said this morning, the proposal offers no actual solution to the problems with the industry. Arguing that China’s steel sector is largely state-owned isn’t a response – there are many, many reasons we wouldn’t want to choose the Chinese model of economics, society and government. Pursglove and Davies’ most compelling argument is that a domestic steel industry is required for defence purposes, ie in case we have to fight a war with China. As Allister Heath argues, that’s a reason to stockpile steel or to mothball plants, but not to permanently fund a loss-making industry out of taxpayers’ pockets.
  • Help Port Talbot, Redcar and other steel towns adapt. There is no sign that the challenges for the UK steel industry are going away. Even if we abolish policies that push up the cost of energy, and even if China stops its practice of exporting steel at a loss, British steel will still be more expensive than much of that produced abroad. Tariffs would be unacceptably damaging to other British industries, and nationalisation would be an unreasonable and permanent cost to the taxpayer. A wise Government would implement a contingency plan to help communities that are reliant on local steel to increase the breadth of their economies and reduce their reliance on one troubled company. Making the affected areas into enterprise zones – with tax breaks for setting up a business there, establishing operations there or employing staff there – for a period of a few years could help to ensure a less painful transition away from steel.

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