Over the weekend, the Government recalled Parliament on a Saturday for the sixth time since the Second World War. The other occasions: the adjournment debate in 1949, the Suez Crisis, the Invasion of the Falklands, the passing of the EU Withdrawal Agreement, and tributes to the late Queen Elizabeth II. The severity of these events (except, maybe, the summer adjournment debate of 1949) should indicate the importance of the recall, at the very least in the eyes of those who authorised it.
Legislating against loss
The reason for the recall was to introduce a ‘Steel Industry (Special Measures) Bill’ to Parliament for the first time, and pass it all in one day. This bill grants the Government the power to direct steel companies in England, in other words, to grant the Government licence to protect the jobs of those working in British steel production. In particular, it aims to give the Government the necessary powers to protect the workers of Scunthorpe Steel Works, currently employed by Chinese steel giant Jingye, against the foreclosure of the works’ blast furnaces.
This is the Government learning from a similar case last year, when Port Talbot Steel Works, under another foreign company, Tata Steel, closed its blast furnaces and cost thousands of jobs, almost overnight. The Conservative Government took a relaxed attitude to the crisis: it organised a £500 million ‘rescue deal’ with Tata Steel, subsidising the retention of about half the Port Talbot workforce through the transition to electric arc furnaces, and the Labour Government did not have the time to renegotiate it. In the meantime, thousands of jobs were lost, and thousands more affected – Port Talbot is a community reliant on steel, and with precious little alternative industry, there are few skilled work alternatives for those made redundant.
For the most part, the failures in Port Talbot and Scunthorpe were well-telegraphed and easily predictable. Both works were obviously going to have to shut down their blast furnaces after plans for the CBAM were finalised – an EU regulation banning the importation of blast-furnace-produced steel. Moreover, the continued use of blast furnaces was completely at odds with the Government’s green agenda. The Port Talbot Steel Works, for example, represented 20% of Wales’ carbon emissions, and 1.5% of the UK’s net. This, alongside cheaper opportunities to produce steel elsewhere, made for a perfect storm. A shift away from blast furnace steel was unavoidable, but it was also completely predictable, and yet governments have consistently failed to prepare for it.
The case for state intervention in industry
Industrial failures like that which has happened in Port Talbot and Scunthorpe are self-evidently bad. For the communities, it can be existential. Clune Park, near Glasgow, is a terrifying testament to that. Individuals living in these communities are more likely to lag behind in education, or to leave their local area for opportunities elsewhere in adulthood. For Governments, quite simply, it is expensive to lose industries – industrial job losses make local authorities increasingly likely to be in receipt of Government benefits, and a decrease in manufacturing is a drain on growth potential.
The current Labour Government wants to avoid the same policy failures in Scunthorpe as those the previous Government made in Port Talbot. And Saturday’s recall proved that. It also makes clear that this is the first pro-nationalisation Government since the Callaghan ministry nearly fifty years ago. This may be unsurprising to some (nationalisation of rail has been Labour policy for the past decade), but it was only five months ago that Sarah Jones MP, Minister for Industry, asserted that “the Government has no plans to nationalise British Steel”.
What does this mean? Firstly, it is a good thing. Privatisation of British industrial assets has had major consequences for its regions going back decades. Leaving these regions to market forces has been unilaterally bad. A study by the Productivity Institute in 2020 identified twenty sites that faced major industrial decline in the 1970s, and found that nineteen of them have majorly suffered, and are now “a source of economic and social deprivation and political discontent”. The only exception was Corby, which was only anomalous because the impacts were so severe it necessitated major, long-term Government intervention. The worst piece of advice the Government could possibly follow, in light of the past fifty years of industrial decline, is to keep doing what you’re doing.
The high price of ownership, and the promise it holds
Nationalisation, of course, is no small thing. It costs a lot of money, not just in terms of the upfront takeover costs (which themselves are hard) but it adds continual running costs which, though potentially recuperable, will require an upfront investment. If state ownership does occur, takeover costs will be slightly mitigated for the fact that the Government has a clear line that if British Steel is failing as badly as Jingye suggests, its market value is zero and Jingye will receive no compensation for it. Whether the money for this will need to be accounted for under the Government’s fiscal rules, or whether it can count as infrastructure investment (and is therefore excluded from the balance sheets) remains unclear. If the former, the money will need to be found. If the latter, it will require immense borrowing, at a time when the cost of borrowing is both very high, and very volatile.
Despite the potential for high cost, a nationalised British Steel brings great potential for the UK. Not only is it a commitment to a more empowered state, taking on greater responsibility for the wellbeing of its citizens (something the past few Governments have consistently failed to do), it is also a great economic opportunity. At a time when supply chains are complex, and the UK is looking to shore up its domestic production, high-quality local steel with no profit incentives might be a boon for the UK. Defence procurement in the UK, for example, is both complicated and expensive. Steel importing for complex manufacture in the UK has been made harder since Brexit. And with infrastructure and construction set to increase over the coming years, demand will only go up. Ahead of a new industrial strategy, set to be published in June, if nationalisation goes well, then perhaps it will be the start of a new economic industrial model.
