Saturday 2 April 2016

Port Talbot: bail it out, by David Powell of New Economics Foundation

Yr Aflonyddwch Mawr welcomes this article by David Powell of the New Economics Foundation even if we are skeptical about the top down strategy proposed our views are contained in the article The Tory attempted murder of the Welsh Steel Industry.

The UK steel industry is again at crisis point with Indian company Tata set to sell its British steel businesses. Attention is focused on its iconic plant at Port Talbot in Wales where 5,500 people are employed – although it’s grim news too for the other plants across the country.

Steel workers are already reeling from huge job losses over the last few months. In October last year the liquidation of Thai company SSI’s UK arm led to the mothballing of its Redcar plant, taking with it 2,200 jobs.

Tata has already axed 1,000 members of its workforce earlier this year.

At the time of writing, the government was considering – or at least not ruling out – stepping in to bail out the Port Talbot plant. This is the minimum that it should do.

The big question is economic

Is the continuation of the plant viable and profitable? And how long would any bail out last until we know? UK steel has become unprofitable thanks to a glut of Chinese steel on the market, which has hugely depressed prices.

Currently, the main solution that has been proposed is for higher tariffs to be imposed on steel imports to the EU – as they have been in the US.

Until this is addressed, any new owner – whether private, cooperative or nationalised – risks perpetual buffeting by global forces. But the UK has been criticised for actually resisting attempts by the EU to crank up tariffs.

But whatever happens, the UK’s steel workers need the government to be as proactive in helping the steel industry as it was in bailing out the banks in 2008.

So how could a bail-out help?

Importantly, a bail-out would create much needed time to find a solution that works for the steel industry and our economy. And it would create time to find a new private owner – Tata’s plants in Scunthorpe and Lanarkshire are already reportedly attracting interest from new suitors.

More excitingly, it’s possible that a very different way of running the plant can be found – like a new cooperative model of ownership, as NEF set out in our 2013 report with the TUC outlining an industrial strategy for Wales.

But a bail-out also offers a chance to reorient how a troubled sector fundamentally works. Following the financial crisis in 2008, the nationalisation of RBS presented an important (but missed) opportunity to set the bank on a new path, and reform our broken banking sector. We proposed that breaking RBS up into local savings banks would help diversify our banking system and demonstrate that the finance sector could, and should, work in the public interest.

We need a proper plan for UK industry

The root causes of the UK steel crisis go back decades, during which successive government’s attention has focused on one sector: finance.  While the interests of the City have been prioritised and the freedom it demanded granted, the government has been forced to step-in to mop-up the crisis that resulted. And the dominance of finance has hurt other sectors, like steel – for example, the strong pound it has led to has hurt exports.

While the Chancellor was busy trying (and failing) to take the UK to court for capping bankers’ bonuses, areas like Port Talbot have been left to stand or fall on the decisions taken dispassionately in boardrooms on the other side of the world.

We need proper, sectoral and regional industrial strategies. This challenge is very real in areas beyond the steel sector – for example the need to wean high-carbon areas like Aberdeen from fossil fuel jobs to a sustainable, employment-rich future.

Vulnerable industries desperately need leadership and a hands-on approach from government – particularly if they need to transition fast to ultra-efficient processes or futureproof green energy industries.

The government has to help Port Talbot – now. But bailing out a proud and nationally important industry isn’t really a plan: it’s what you do when you’ve actively decided not to have a plan, until it’s virtually too late.


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