Should we Save Our Steel? One Mail columnist argues it's a strategic national asset vital for Britain's future security, but another dismisses it as a dying industry that no amount of taxpayer cash can revive
Yes! It's a strategic national asset vital for Britain's future security, says ALEX BRUMMER
Britain’s trading partners can only look on with bemusement at the fumbling way in which David Cameron’s Government has handled the crisis in one of the nation’s most strategically important industries.
The fact that the last Labour government allowed a profitable and competitive steel industry to fall into the hands of foreign ownership in the shape of the Indian conglomerate Tata in 2007, with the purchase of Anglo-Dutch Corus Steel, without scrutiny or guarantees for future steel production, was bad enough.
That its Tory successors should even consider the possibility of allowing Tata’s biggest UK steel-producing site to close would be folly on a grand scale.
Alex Brummer argues it is essential for Britain's security that we maintain a steel industry
The company’s planned sell-off would blight areas from Port Talbot to Teesside for generations. More worryingly, it could leave the UK wholly dependent on foreign supplies of steel, at a time of grave geopolitical uncertainty — with China and Japan at loggerheads and the Middle East in turmoil.
Our steel once forged the warships and tanks that helped us defeat the threat of Nazism. And if history teaches us anything, it is to expect the unexpected.
Whenever business issues of strategic importance to the nation’s economy have come up, this Government and its Coalition predecessor have shown themselves to be hopelessly naïve. The problem is that the decision-makers in Downing Street are professional politicians with virtually no significant commercial experience at all.
It was only with the help of a campaign by this paper in 2012 that an ill-conceived plan to sell our biggest defence contractor, BAE Systems (the former British Aerospace), to Airbus-owner EADS — a company dominated by the French and German governments — was averted.
Those who do have financial know-how, such as beleaguered Business Secretary Sajid Javid, earned their spurs in investment banking and private equity.
In both these lines of work, short-term thinking and the size of the next bonus are the prime drivers for decision-making.
As a result of this inexperience at the highest level, the country has ended up in the appalling position of having decisions about the future of British industrial infrastructure made in Mumbai for steel, and in Paris and Beijing when it comes to the next generation of nuclear power stations — now dependent on French government-controlled EDF and Chinese finance.
All of this has terrifying implications for the future security of this nation.
But we should also remember that far removed from the lives of British workers, foreign owners are able to dictate vital decisions about our economic future without any checks and balances from shareholders, employees or communities who are central to the nation’s manufacturing future.
Workers wait to speak to Business Secretary Sajid Javid as he leaves Tata Steel in Port Talbot yesterday
According to Tata and the Government, the fate of Port Talbot is the result of prevailing global conditions. In other words, Chancellor George Osborne’s new friends in China are flooding the global market with cheap steel because their own economy is faltering, and they can no longer consume the quantities made at home.
But China’s slowdown should be no surprise to anyone. Nor should the current glut of steel. Any government with an understanding of global industrial conditions would have contingency plans.
Only last December, a Select Committee of MPs accused the Government of ‘failing to be alert’ and ‘washing its hands’ of the closure of the Redcar steel plant on Teesside by Thai owner Sahaviriya Steel Industries (SSI) two months earlier.
That should have been enough to forewarn policymakers of the potential for a similar catastrophe at Port Talbot.
Steel is vital to the UK’s economic and national security. As one of the world’s largest military powers and exporters, steel is a fundamental component of our own defences, as well as the equipment we sell to the rest of the world.
Specialist steels, produced in the UK, provide the metal and armour that goes into frigates, submarines and Land Rovers. It is also used in the manufacture of heavy weapons.
There is not much point in spending 2 per cent of national income on defence unless it is supported by a manufacturing supply chain.
It is unthinkable at a time when the Government is seeking to drive a major modernisation of the nation’s infrastructure that we should be dependent on foreign suppliers.
Among the projects being developed are the transport links for the Northern Powerhouse, hundreds of miles of new track for the £43 billion HS2 rail link, London’s Thames Tideway super-sewer project, and the Crossrail tunnels and stations across the capital.
Some people will argue that with Chinese steel plants operating at full tilt and providing half of global needs, it makes no economic sense to be making our own, more expensive, steel. But the demand for, and value of, steel goes in cycles.
There may be surplus, cheap production now, but as the world economy picks up momentum, that may not be the case.
If we abandon Port Talbot and let the steel industry die, not only will the UK become dependent on the whims of foreign suppliers (who are likely to put their own needs first), but it opens the door for China to charge ever-higher prices.
No responsible government wants to find themselves reliant on a foreign power.
This explains why the Obama administration in Washington has been so forceful in imposing a 256 per cent import tariff on corrosion-resistant steel imports from China.
David Cameron with other world leaders today at the Buclear Security Summit in Washington yesterday
It is possible to believe in the benefits of free trade and globalisation. But, at the same time, we must accept we have to maintain some domestic steel production for reasons of national and economic security.
The very possibility that China could strangle global steel supplies if, for instance, there was a conflict in the South China Sea against Japan and America, would be seen as an act of gross negligence at the Pentagon.
Contrast America’s defence of its strategic interests with Britain’s craven behaviour.
Trade officials from two large EU steel producers, France and Italy, have been complaining bitterly that Britain has been blocking efforts by Brussels to reform trade policies so it, like the U.S., can impose higher import tariffs against cheap Chinese steel. Which brings us back to Port Talbot and the question of what can be done to save it.
As we learned from the closure last year of the blast furnaces and coke ovens at Redcar, once these facilities are shut down they become pieces of industrial archaeology.
The cost of recommissioning them would run to billions of pounds, and would simply not be economic. That is why it’s vital for the Government to make a massive effort to keep Port Talbot open, even if it does come at a temporary cost to the Exchequer.
Former Prime Minister Ted Heath’s Tory Government ensured Britain’s capacity as a world-class maker of aero-engines was preserved when it temporarily took Rolls-Royce into public ownership in 1971.
Similarly, in 2002 Tony Blair’s administration saved our nuclear power generator, British Energy, from bankruptcy by excusing it from payment of a climate change levy, picking up the bill for decommissioning older facilities and offering it state-subsidised loans.
When the energy price recovered in 2006, the whole caboodle was sold back to the private sector for £12.5 billion.
The capacity to produce steel is an essential component of the manufacturing infrastructure of any nation that seeks to preserve military and economic independence.
Which is why David Cameron’s failure to think long-term about Britain’s steel manufacturing, and the nation’s strategic future, could prove disastrous for this country.
Nonsense! It's a dying industry that no amount of taxpayer cash can revive, says DOMINIC SANDBROOK
The fate of Port Talbot is a tragedy. No decent person should feel anything other than deep sympathy for the steel workers abandoned by the Indian giant Tata.
But should the Government step in to save the steel industry, spending millions to keep the Port Talbot works alive?
Should they, perhaps, heed Jeremy Corbyn’s calls to take the industry back into public ownership, at a cost of some £1.5 billion a year? Is it time to open the Whitehall chequebook, throw up protectionist trade barriers and defend our remaining heavy industries, whatever the cost?
The Government shouldn't heed Jeremy Corbyn’s calls to take the industry back into public ownership, at a cost of some £1.5 billion a year
The answer is simple. No. The truth is, like so many heavy industries before it, Britain’s steel industry has been in deep decline for years.
Thanks to a combination of high energy costs, low EU-regulated import tariffs, plunging international demand and a glut of cheap Chinese steel, Tata’s British business has been losing a staggering £1 million a day.
If the Government stepped in, it would effectively be committing itself to day after day of million-pound losses.
That might make sense if there was a clear path to recovery and future growth, and if our politicians believed Britain’s economic future lay in an expanding steel industry.
But no sane person genuinely thinks that in a few decades’ time, new steelworks will be flourishing across the country. To put it bluntly, the steel industry belongs to Britain’s past, not its future.
And although it is certainly the Government’s job to mitigate the pain by luring new employers in other industries to South Wales through tax breaks and enterprise zones, recent history offers some tough lessons in the folly of trying to stem the tide of global economic change.
There is, I agree, a role for the state in supporting British industry. Where markets are expanding, or where technology is in its infancy, government money can play a vital role in building up our businesses to take on foreign competitors.
The truth is, like so many heavy industries before it, Britain’s steel industry has been in deep decline for years
But the case of the steel industry could hardly be more different. It reminds me of the Seventies, when successive governments wasted millions trying to save industries that were no longer viable.
The rhetoric back then was exactly the same. Every coal mine, every car factory, every steelworks was ‘indispensable’ to the national economy. Every projected closure was ‘unthinkable’, a ‘tragedy’ and a ‘disaster’.
And every failing business was a world-beater in waiting, a ‘vital national interest’ that could not be allowed to disappear.
So IT was that in the course of that decade, we spent hundreds of millions propping up the Clydeside shipbuilding industry, despite the fact every serious economic observer agreed that it was doomed.
When Chrysler threatened to pull out of British car-making in 1975, with the loss of 27,000 jobs, the Government wasted a whopping £163 million keeping alive a business that actually competed with its own state-owned car giant, British Leyland — and which then went bust anyway.
The figures make truly mind-boggling reading. And as it happens, the steel industry offers a very revealing example.
Once, Britain was the world’s largest producer of steel. But by the late-Seventies, thanks to chronic over-manning and appalling labour relations, a typical British steel worker produced a third less than a French worker and 40 per cent less than a German one. To the Labour Government of the day, however, any talk of reform was anathema.
As Tony Benn (then Secretary of State for Industry) told astonished colleagues, even a single lost job was an unimaginable tragedy.
So, every year, more money was pumped into the steel industry, despite the fact that British steel was patently uncompetitive.
In the fiscal year 1978-79, British Steel lost a staggering £309 million, rising to £545 million a year later. By 1981, British Steel’s losses had risen to £1 billion — underwritten, as ever, by the taxpayer.
And steel was, of course, only part of the story. Under Benn’s much-derided National Enterprise Board, billions were thrown at the sclerotic British Leyland, home of the reviled Austin Allegro and Morris Marina, despite the fact the Government’s own consultants had advised them to pull the plug.
Business secretary Sajid Javid visited Tata steel works yesterday and met a very hostile crowd
Perhaps it was no coincidence that, in 1976, just a year after the Government had approved a massive £1.2 billion British Leyland bailout, Britain was forced to take its begging bowl to the International Monetary Fund.
Not surprisingly, the IMF was distinctly unimpressed to find the Treasury was planning to borrow a then-record £12 billion to cover its vast obligations, and promptly demanded some £2.5 billion in cuts in return for a loan.
Had all these subsidies, handouts and bailouts done the trick, perhaps there might have been something to be said for them.
But all they did was delay the inevitable, costing tens of billions.
Whatever you may think of the late Margaret Thatcher, one of her qualities was to recognise the stark reality of the balance sheet. Her critics claim she killed off the steel, car and coal industries, and that she simply turned off the tap to British industry.
Nonsense. Mrs Thatcher gave millions to booming young industries such as computers, which clearly represented the future. I believe she was right to accept the challenging reality that our economic future lay with high-tech products and services, not heavy industries of the past.
Mr Cameron ought today to heed the lessons of the Seventies and Eighties: we should not be seduced by the false promise of protectionist import tariffs, which would do untold damage to successful British manufacturers who rely on foreign markets.
Our history, after all, is that of a proud manufacturing nation that has always embraced change and encouraged free trade. During our Victorian heyday, we were the greatest industrial powerhouse, developing new products and technologies that left the rest of the planet struggling to keep up.
Miner's Strike 1985, when Thatcher closed the mines, refusing to subsidise the loss-making industry
But now, like it or not, we simply cannot compete with the flow of cheap steel from China.
None of this, of course, will come as much consolation to Port Talbot’s workers and their families — just as it came as no consolation to the miners who lost their jobs in the Eighties or the car workers whose jobs disappeared a decade later.
And the Government certainly must do its best to ease their distress, helping them find new jobs, attracting new businesses to boost employment.
But imagine if the Government did as Mr Corbyn suggests, and threw millions — billions, even — at the steel industry. Would British steel become more competitive overnight? Would cheap Chinese steel suddenly disappear? Would the ruinously high energy costs imposed by green levies — courtesy of Ed Miliband’s 2008 Climate Change Act — fall?
Would global demand for steel miraculously recover?
Not a bit of it. Instead, the State would be responsible for a loss-making industry. Eventually, some future Chancellor would seek to pull the plug. And the fallout would be even more bitter.
Yes, I know, the Government bailed out the banks. But the banking system was, and is, absolutely vital to our national life. Had the financial system fallen, taking savers’ money with it, the results could have been apocalyptic.
Distressing though it may be for the people of Port Talbot, the fall of the steel industry is not on the same scale.
In short, no government should waste millions in a futile and fruitless attempt to keep alive the relics of our industrial past.
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