The steel industry is dirty. It eats energy. It consumes the earth's resources. And as yet we need it.
The Chinese could, and are, swamping our steel industry, as they are that of Europe. But we cannot be dependent on China for such a fundamental resource. That is just not strategically possible. So we must save steel.
How? Let me suggest People's Quantitative Easing funding a National Investment Bank to provide the funding, quite literally costlessly.
We did QE for banks. Now it is time to do it for steel.
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If the PQE is used to create a joint state/worker owned enterprise, it would help protect both the national and local community interests. And create a model for future state/worker/community owned initiatives.
State funding to prop up another failed/corrupt privately owned institution would not be appropriate in my opinion. But that is most likely the best we can expect from the Tories.
I look forward to being pleasantly surprised with a new enlightened approach from the “real party of the working people”, but don’t hold out much hope!
The public at large just don’t get the seriousness of this. I think we need to go back to your Venn diagrams and mind maps to put this in a simple way for people to understand.
Now there’s an idea
Keith is quite right. Surely steel production is still a key component of the UK’s manufacturing and construction industrial base.
I would venture to say that the UK is not competing in either a fair or free market, but one that is rigged against us.
Globalism is in so many ways a race to the bottom, which will result in increasing not decreasing worldwide poverty. The plan should be about raising the living standards of the third world, but this is the furthest thin from the minds of those pulling the strings in the background.
The facts are that we saved the banks because we needed to get our money out.
But we also all use steel on a daily basis in some way too and it would be great if that was British made steel.
At times like this, we can see who truly benefits from globalisation. Yes – it has helped people out of poverty elsewhere in the world – but how often did we know that it would be at our expense and that poverty would come home as a result?
“At times like this, we can see who truly benefits from globalisation. Yes — it has helped people out of poverty elsewhere in the world — but how often did we know that it would be at our expense and that poverty would come home as a result?
Wasn’t such restructuring predictable? I never thought it would lead to quite so much inequality within the submerging powers (UK and the former colonial countries), but surely a restructuring of global labour markets was always inevitable?
Entirely predictable
And desired
Spreading wealth and lifting the living standards of people around the world is great – yes of course. Which reasonable person could argue against it?
I’m not critical of the intent – but the means are unacceptable to me.
When it results in established work forces being undermined and then plunging them into poverty relative to their own local living standards then that is not acceptable to me because taken as whole nothing has really changed. The number of people in the world whose lives have improved has not actually gone up has it? Because some are losing out in the process.
All the modern globalisation era has done is move the means of production to cheaper areas of the world so that there is more profit to be had for those who own and earn rent from their interest in it. There is also a loss of tax and other income to the State who loses the production capacity.
There is also evidence to suggest that most of the profits from these new industries set up abroad seldom finds itself into the pockets of the actual workers who can remain low paid. A new management class is created and there is fair dose of corruption out there too if you read about it.
I find the comment about the ‘inevitability’ of it all a bit flippant to be honest. If this country had a more generous benefit system or citizens income, a housing market that priced housing correctly, an education and training system of affordable cost (to enable people to retrain in the economy to be adaptable for example) I’d have less of a problem with it but as things stand, flippant it is.
I also object to the fact that the steel being produced in the UK is perfectly good steel and is only under pressure because of another product being dumped in huge amounts on the market. So competition is not through excellence – it is through a crude price mechanism. And unlike other governments it seems that ours are so led by markets that they will not protect it by putting in effective levies on Chinese steel or subsidising energy costs to the right level.
As the steelworks in Wales come under increased threat, Channel 4 News showed a queue of people attending interviews for a job (jobs?) at a nearby Aston Martin factory. The queue – at one point located near one of the luxury cars it makes – was very long but also was a symbol of some deeper unpleasant truths about how the world economy works today as well as what awaits potentially twenty odd thousand out of work Welsh steel workers.
There must be a better way of organising economic life – and it is not by competition on price alone.
Otherwise, we face some starker choices in coming years. As in ‘We are sorry but you are not allowed to have children because 1) we don’t have enough work for them or(2) we are not prepared to pay them to do nothing – even if it was our fault we got rid of the all the jobs anyway.
Why is it so important we don’t import the steel, but not so important that we import the ore? It makes no sense.
British steel should be scrap recycling and forming. There is no point importing a load of slag that we then have to dispose of.
The EU commission set the dumping tariff at about 13%.
That is the value the EU commission considers is sufficient to set Chinese steel on a competitive par with EU steel. Not anybody else – the EU commission.
So as far as the EU commission is concerned any problems in British steel manufacturing is down to the inability to compete in a global market.
The Tories are trying to stop transfer of more powers to the EU trade directorate – which they don’t need.
So blame them.
We have none of the *right sort* of iron ore in the UK any more and we have no coal power plants near the mills. Virgin steel manufacture make no sense whatsoever – particularly in an EU context when there are plenty of steel mills across the EU that are much nearer the source of the ore and power. UK steel mills have been built to use imported ore for nearly a century.
The UK steel mills should be recyclers and formers – which is why the Rotherham plants are not really under threat.
There is excess steel capacity across the world. So somebody is going to lose their jobs somewhere. It’s rather interesting that the whole EU/international solidarity thing goes right out the window once job losses are on the cards.
What we need to do is ensure that the workers from the obsolete steel works have another living wage job to go to. The failure of UK industrial policy is no alternative employment.
If you are a Europhile then the closure of Port Talbot is just part of the requirement to reduce output to meet demand. Because of course requiring a UK manufacturer to use British Steel rather than European Steel makes no more sense that requiring an English manufacturer to use English steel rather than Welsh steel.
To be clear, my point is the EU commission can alter the anti-dumping tariff as it sees fit, and that will then get applied using the “lesser duty” rule.
Again the question is why they haven’t simply increased the 13% rather than pushing ahead with more power transfer to Brussels?
In response to this question it is because the UK Government have argued strongly within the EU against any increase in the current 13%:EU tariff:
https://www.craigmurray.org.uk/archives/2016/03/tories-deliberately-collapsed-british-steel/
“This is pure Thatcherism. On Javid’s instruction, last year the British diplomatic mission to the EU (UKREP Brussels) was lobbying the EU commission against higher punitive tariffs on Chinese steel than the 13% the UK supported — even though the Commission found that dumped Chinese steel had an effective state subsidy of up to 72%. I have this from a British diplomatic source.”
The argument presented is that it is down to the bad EU when in fact the 13% EU limit is largely a result of UK Government lobbying because it does not want to upset it’s new bestest friends in China.
And this in turn is down to 40 years of deindustrialisation and transfer of manufacturing industry abroad in favour of a finance and service economy which has reached a point where we cannot even make and build our own energy generating plant but must go cap in hand offering massive taxpayer and public user subsidies to others to build it for us. All driven by a failed and unworkable neo liberal doctrine which has impoverished the majority of UK citizens and benefitted a tiny minority of legalised criminal sociopaths who get a free ride for this organised criminal activity from battalions of forelock tugger and cap doffers suffering from Stockholm syndrome.
Actually, the British Conservative government has blocked the higher rate that the EU wanted.
‘Tom Blenkinsop, Labour MP for Middlesbrough South and East Cleveland, said it was “utterly despicable for Cameron to say that in any way shape or form that he is supporting steel if his government is actually blocking attempts at a European level to place tariffs at a far higher rate on steel-dumping nations like China”.
“According to calculations the tariff should be more like 66% not 9%,” he said. “The EU commission wants to change things so we can up this potential tariff from 9% to something higher, and the UK government is most definitely the ringleader amongst EU nations opposing this.”
http://www.theguardian.com/business/2016/feb/10/david-cameron-accused-failing-uk-steel-industry-blocking-eu-lesser-duty-proposal
Astonishing isn’t it?
Steel would just be the first in a long list of goods that would end up getting clobbered with higher tariffs. First steel. The next German clog manufacturers.
The EU commission already has the power to lift the tariff if it wants to. Do a recalculation. There are plenty of ‘injury’ reports on its desk. And it can do it retrospectively.
You seem to be confusing making steel, with making basic iron.
The plant to produce steel will still exist, the ones that take iron-ore/coke/lime etc and produce basic iron will close. Irrespective of government action/inaction, they probably will close anyway. Energy-intensive and ecologically unsustainable, they are probably the part of the industry we can leave to low-paid peasants in countries where we don’t see the eco-disaster they produce (rather like the one caused by refining and producing the parts for solarPV cells).
The plant that take the iron and produce steel will remain, as will the specialist steel producers that make the various alloy steels/sheet steels etc.
You also have to remember, if a blast furnace closes and cools, it’s game-over. The furnace, which operates continuously over a decade-long cycle, will be destroyed if cooled and need to be rebuilt. VERY expensive.
I shouldn’t worry about it too much…we have not mined iron ore in this country since….well….we needed a LOT of iron ore. And we import most of the coal as well, since our coal is not “right”.
So we lose the REALLY dirty part, and retain the not-so-really-dirty part, the part we REALLY need to retain. Simple.
In the real world, we have imported most of our steel for a decade or more. Lots from Germany. Who have their own problems, mainly caused by the dramatic difference between domestic and industrial energy prices.
Bob That, I must admit, is a convincing argument.
As long as recycled steel can be processed without iron ore?
We could certainly aim to make the UK into the best steel recyclers of the world. And there is as you say the complete and utter failure to have any industrial policy at all. So probably QE for steel to manage its decline.
The people of Port Talbot, Neath and Swansea area are in shock, their steel works is a vital piece of the Welsh economy. They are upset and raw with the news that their steel works may close soon. As you are aware Richard I am from the area and yesterday my Green colleagues sent letters to the media regarding this gross failure of industrial planning. Wales makes good quality steel, and we ask that British manufacturers buy their steel closer to home so that our jobs and communities can prosper as they should. We must campaign to make sure that new investors don’t profit at the expense of the workers. The work force have been badly let down by all concerned.
I can remember the 1980’s where families were selling furniture on the streets of Neath and Port Talbot, this is the further demise of a once proud industrial region and its painful decay. In the 18th and 19th centuries Swansea was a leading processor of tin and copper, by 1820 >90% of the world’s supply of copper was from Swansea and the town named “Copperopolis” [1]. Coal employed 125,000 directly in 1925’s south Wales, taking a big influx of people from over Europe into the region contributing to a thriving industrial boom.
The Financial Times has followed Tata’s strategy over the last year(s) and we are aware the TATA board have been seeking to “get out of steel” within the UK. Port Talbot is a 1950s plant and whilst TATA have invested, those who have visited equivalent facilities on the continent e.g. TATA’s steel works in Holland refer to PT “as a bit of a dump”. In 2005 the Harvard Business Review noted the correlation between rising Chinese steel subsidies and their exports. The warning chimes started then.
The fact that the Prime Minister and business secretary preferred to jet away says it all about Tory UK industrial strategy.
The Tories have an unfinished job, started by Thatcher, to fully dismantle organised labour, as part of a sink or swim policy for manufacturing. This has been a disaster for larger projects where we see major engineering opportunities, in the UK, outsourced to France, Germany, Spain, Japan or China. We have the Engineering talent, our universities and industries are world leaders in many fields, including the steel industry. A conservative Govt saved Rolls Royce in the 1970’s what would this bunch do? We need to find intelligent solutions for the Welsh future and its economy.
What could the UK Govt do:
1. Implement the EU 2014 Procurement Directive, which allows the Buyer to measure bids on Socio-Environment as well as economic (price factors) then Steel could be preferred from Port Talbot for example. UKIP take note.
2. Energy subsides (whilst investing and developing Green energy alternatives). Subsidies to increase energy efficiency and reduce business impact of carbon taxes (or ring fence some revenue raised from steel industry carbon taxes to re-invest in green projects).
3. Have a credible industrial strategy, especially for critical industries — Energy and Steel are just two. Sustainable long term strategy, not just policies “for those who vote for us”.
4. Nationalise or subsidise, for the interim. Develop new Public/Private partnerships structures, for The Peoples’ benefit. The Market has obvious weaknesses in unrestrained global commodity prices — oil, steel, gas etc.
What else:
5. Continue to develop high quality products. South Wales was an early leading in coated strip steels (1970s for colour coating), high quality steels (railways, car, aerospace).
6. South Wales plants are researching and developing extraordinary rolled steels e.g. solar cell coatings; even the UK has enough sun light to make this a huge market.
7. Call out EU companies for not supporting EU steel, e.g. I think Siemens uses Chinese steel in its wind turbine division.
8. The UK cannot compete against a subsided Chinese industry, UK steel production is insignificant compared to China, with only 1% of China’s capacity. Chinese steel works are being made redundant, recently with 400,000 direct jobs recently lost.
9. Tata are “losing £1M a day” — we’d love to see these accounts!
[1] http://www.channel4.com/programmes/time-team/articles/all/swansea-copperopolis
There’s a plan in there
Green QE is one implicit solution in the above.
Dear Richard,
Have just watched Ken Clarke (the left Tory by all accounts. I imagine him hanging there with Duncan Smith in a Sac. Sorry, rude) prevaricate about how the state could support British Steel. My family were steel workers (my 70 year old father is still a consultant. More in Castings than forging). Thought Mason held his side of the argument well although was not given enough time to explore Ken Clarke’s argument. That could have been pretty. 24 hour news seems to give no more time to arguments.
Anyway… You are a tax expert. Do you think that with calculated carbon taxes (On transport and production. All steel is shipped by sea so avoids transportation taxes. Stupidly in my opinion. I work in transportation and Bunker is basically tax free and heavily polluting. Steel production is very heavy in a carbon usage sense too. If calculated correctly I think it could bring home grown (so to speak) steel in to its own almost profitable market. (OK UK is probably out of Iron Ore etc… but, so is China)
Same could be true for a lot of other goods that are imported from overseas. Does Thailand really hold all of the chemicals and expertise to create hard drives? (Hard drive density is around the basic minimum for air freight cost to not be a consideration in their manufacture anywhere in the world. Assume anything with a density over 1/7 is going to cost you… Try working out the density of your phone… interesting experiment)
I hope this will pass your moderation as I think I have a few interesting points. I genuinely enjoy your blog and wish all power to your hand as your campaigning exposes far too much from far too many.
Greetings from Switzerland (I like it here and am paying taxes)
Robert
Robert
I suspect your argument is entirely sound
Tax is helping free-riding
Richard
Subsidising Tatar Steel is going to cost £1.5 billion dollars. If the 40,000 set to lose their jobs are not found jobs, they will be claiming JSA approx. £70 per week and HB and Community Tax relief. Since there is little in the way of Minimum Wage jobs available by not subsidising the industry it will cost the government in excess of £1.5 billion. This is just off the top of my head so maths. may be wrong. But if right, surely while the steel works is operating wages are being paid and taxes into exchequer and sales profits also. I have a simple approach and am not an economist but does supporting the industry not sound like a better deal economically. Much of the subsidy would be mitigated as long as it survives. It is after all, Cameron’s doing that he has vetoed EU calls to impose a levy on Chinese imports thus allowing the market to be swamped by them. I am very simple minded with regard to basic economics so accept that my thinking is probably very naive.
Isn’t this yet another example of the utter moral and intellectual bankruptcy of the right in this country? As several of you have already pointed out, the EU would have put much greater tariffs on dumped Chinese steel were it not for this government, and its ludicrous obsession with so-called ‘free trade’, even if this trade is utterly distorted by state subsidies from a Communist government!
What kind of madness is this? As an example of this idiocy, Richard’s sparring partner from the IEA, ‘comrade’ Littlewood was on R4 arguing that we should let the steel industry go under because, thanks to the Chinese subsidies, we can get hold of really cheap steel. To impose tariffs was interfering in his beloved ‘free market’ apparently.
Where does one start with the idiocy of people like this? He wants ‘free markets’, but then makes no objection when one of the participants in this market receives subsidies from it’s own government, even though this government stands for an ideology that the IEA is totally opposed to, and subsidies are a distortion of the market as much as any tariff! How absurd is that?
Dave Hansell is completely correct. We have a government, and people like the IEA and ASI who can’t even see the contradictions within their own argument. Their loathing of the idea of the state playing a significant role in the economy only extends as far as the British state it seems. Hence, while the whole British public sector is to be sold off, or wrecked, we go crawling to the Chinese and French to build and fund Hinckley C, because apparently we no longer have the expertise or funds as a nation to do this ourselves.
And the Conservatives have the nerve to wrap themselves in the union jack, and portray themselves as protectors of the national interest. All they actually care about is the ‘free market’, which is an absurd perfectionist ideal that doesn’t, and never has, existed in the real world.
The contradictions are quite extraordinary
They wrap themselves in the Union jack-but it only means one thing:
http://www.metmuseum.org/toah/works-of-art/1987.1125.8/
backhanders all round!
The past and current resistance of our government to the raising of tariffs by the EU does make one wonder what exactly was agreed on this during the frequent visits of senior UK ministers to China, and vice versa. We need to keep in mind when thinking about such things that our corporate and political elite have far more in common with the elite of the (so called) communist government/party of China than they do with UK workers.
Astonishing but entirely true
I’d also recommend any of your readers who haven’t already seen it to read Martin Kettle’s piece on Sajid Javid in The Guardian. I was aware of this very insightful information on a member of our government I find even more repugnant that most (and that’s saying something) but a lot of people won’t be. In short, don’t expect a disciple of Ayn Raynd – which is what Javid is – to support anything other than red in tooth and claw capitalism – whatever he’s currently saying about ‘constructive meetings’.
http://www.theguardian.com/commentisfree/2016/mar/31/nationalisation-state-save-steel-port-talbot-tata-industrial-policy
Staggerona that a person with such limited insight into the human condition gets to such a position
Precisely Ivan, as I said above this government, and its fellow ideological travellers, are, if I may use the word, anti-patriots. They actively dislike, and act against genuinely British organisations like the BBC, NHS, welfare state, and indigenous manufacturing industry, as well as a very large percentage of the UK’s population e.g trade union members, anyone in receipt of any form of social security, charities, etc, etc.
But they positively grovel to foreign corporations like Google, and governments like the Chinese. I can only suppose that the membership of the Conservative party, and people who vote for this anti British government, do so for the reasons Dave Hansell lays out.
The only thing the Tories and those who support them are concerned about is money. Nationality, loyalty, community, people – all those things mean nothing to this group.
I was always stuck by how the UK based traders behaved during Black Wednesday in the Major government – how they effectively worked against their own Government to make millions upon millions of pounds for themselves at the cost to the country.
As far as I am concerned this was mothing but treason.
On a brighter note, in the conversations I attempt to have with people on these issues, there is a lot of unhappiness about the recent changes to pensions. People are increasingly saying to me that they feel these changes are very unfair and that they are being punished for nothing (because they feel that by being in a pension, they have behaved responsibly about their futures).
This may be a sleeping giant of an issue for the Tories come 2020 and I hope that all her majesty’s opposition is picking this up. In other words the Tories nastiness may have gone a couple of steps too far on this issue ad it could really hurt them at the next election. I hope so.
I do think this is a major issue lurking on the horizon
It has not dawned on people that retirement is not at 65 as yet
Me, it’s 83….
But many will be very unhappy about this – because they are really at the end of their working lives in their 60s
Not all are, but for those where this happens quite reasonable the change will be very tough
Another expression of neo-feudalism, given that, under feudalism, the chevaliers of different, allegedly “nation”, states, always had not only FAR more in common with each other than with their respective so-called “compatriots”, but also carried out practical expressions of the same, as in the business of capturing hostages for ransom.
Under this system, the hostages would be treated with the utmost deference and respect (consider James l of Scotland, held in England for many years, but treated, nonetheless, as a noble, even if not fully a King, given England’s historic, and wholly mistaken, claim to the throne of Scotland), where not a second’s thought or concern would have been given for ordinary soldiers who were taken captive. After all, they were simply “not one is us” to the chevaliers.
Of COURSE Osborne feels more in common with a Chinese ruler – why not? They are both unquestioned aristocrats in their respective systems, placed their by a façade of democracy, when their real power derives from the shadowy “nomenklatura” in each system – the puppeteers and string-pullers in the City in our case, the REAL “movers and shaker” in the Chinese Communist Party in their case.
One of the burdens on the steel industry, mentioned but not discussed, is Business Rates. Do you realise that included in the valuation for BR are machinery, as well as the bricks and mortar, all of which are part of a business’s working capital? I would guess that this is a folly unique to the UK. Replacement of BR by LVT is a no-brainer. Heavy industrial sites are located low value, so the burden would be light.
And Bob’s comment is worth a good think.
The Budget did contain a measure to exclude NEW machinery from Business Rates assessment. But the Port Talbot blast furnace – that must still be taxed. Utter economic idiocy.
Agreed