Farron and Williams say UK Government must intervene on steel

Tim Farron and Kirsty Williams have said that the UK Government must intervene to be the lender of last resort for Tata Steel.

The Liberal Democrat leader said that the Westminster Government should be prepared to step in and act as a temporary buyer for the plant if required, and also offer financial support to ensure key staff are retained during any sales process.

Tim Farron said:

The Conservative Government in Westminster has let down Port Talbot, not least because of Sajid Javid’s disgraceful veto of measures at an EU level to stop the dumping of cheap Chinese steel that is destroying the UK steel industry. Their actions have helped escalate this crisis while the Labour Government in Cardiff bay has failed to stand up for steelworkers in their own backyard. It’s now time that both Governments started acting in the best interests of workers at the plant and our steel industry.

The Port Talbot plant is the crucible of the British steel industry. It is a proud beacon of our industrial heritage and part of the reason we are a world leader in manufacturing. Generations of families have worked at the South Wales steelworks which still employs thousands of people and provides work for thousands more in supply industries.

That is why the Government should be prepared to step in as an investor of last resort, to bridge any gap between Tata’s ownership of the plant and a future buyer. Our steel industry is of strategic interest to Wales and the whole of the UK and if temporary nationalisation is needed to protect it then the Government should be prepared to act.

Kirsty WIlliams highlighted the importance of Wales’ steel industry:

Wales’ steel industry is of national strategic importance and something we have to protect for the long term. We need a UK Government that is brave enough to make the big decisions. So far, it has been unwilling to do so.

Many of our communities strongly rely on this industry. We must stand up for them, learn lessons from the past, and take strong action now.

People are fed up of hearing just warm words from both Governments over the future of our steel industry. What steel workers and their families need is action. The Liberal Democrats believe the UK Government must be prepared to temporarily renationalise at least part of the plant in order to make sure that it can be passed as a going concern to a new investor and prevent a gap in operation.

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  • No! No! No! We should not be nationalising anything at all, much less following protectionist policies.

    The party must create an arena where the private sector and foreign investors can provide jobs in affected areas when work moves abroad or technology makes jobs redundant. We cannot start supporting protectionism, and bowing to trade union and / or “patriotic” pressure.

    Offshoring is the way of the world and is often desirable.

    Most of the comments in the Guardian by the left are thinly disguised anti-Chinese xenophobia. The left and the BNP have more in common than they would like to admit.

  • GreenEgalitarianLib 30th Mar '16 - 7:52pm

    Yes! Yes! Yes! We should consider nationalising anything where it is in the wider National interest to do so.

  • David Allen 30th Mar '16 - 8:10pm

    China has made the mistake of expanding too fast and is hoping to get the rest of the world to take the hit. It’s not xenophobia to believe that pulling out of key industries is a step on the road to perdition.

    Corbyn is jumping up and down calling for recall of Parliament, but is saying less about what he would actually ask Parliament to do. Perhaps he is running scared of using the N-word. Meanwhile, Tata have sought a buyer for more than a year without success, and they seem – not unreasonably – to be preparing the ground for giving up trying “within weeks”. So, it looks as if anything other than some form of direct government support would just be empty bluster.

    Good for Tim. Time to be bold and honest.

  • Stimpson, Do you see not difference between protectionism and defending the national interest? The Port Talbot plant is no basket case. Labour cut by 80% through automation. Slab output running at maximum. Strip mills exceeding previous output rates. The Chinese are dumping steel on the market at BELOW cost, while it suits them, to destroy competition. Good capitalist practice. Why do the Tories oppose EU anti dumping tariffs? (That’s just defending ourselves against “economic warfare”.) Why does our government insist that Tata should pay over the odds for electricity (+ 50% compared to other EU countries, to the extent that Tata saw the only way out from UK government bureaucracy would be to build their own power station) ? Why does the government think it OK to load Tata with a site Business Rates value of £20.9m ? (We support site value rating don’t we?). The Chinese arn’t looking out for our interests. That’s the job of our politicians.

  • Steel prices are at a 15 year low. See http://steelbenchmarker.com/files/history.pdf if you would like to check. Average prices over this period have been around double what they are now, making Port Talbot viable in the long term. Peak prices have been four fold on current prices. Based on this what Tim and Kirsty have said is perfectly reasonable.
    We just need the Tory Party to act in the national interest. There is a reason why Germany runs a balance of payments surplus and we run a deficit. The short termism of our politicians. They behave as if they know the price of everything and the value of nothing. Just like market traders or shopkeepers, short term.

  • Eddie Sammon 31st Mar '16 - 5:43am

    Criticism to go around for all parties here. The Conservatives have been protecting China, as Farron mentions, but the left have been ramping up energy costs.

    Socialism doesn’t work in one country and it seems capitalism doesn’t either. If other countries subsidise their steel then we might have to as well. The risk is that competitors knock people out of the market and then ramp up the prices.

  • I’ve said it before and I’ll say it again. The stance on public sector ownership in Britain and particularly by the Conservatives is patently absurd. All this talk of private ownership and foreign investors rather misses the reality that a lot of both the investors and owners are actually nationalised industries, just not British ones. This the result of an ideological fetish every bit as dogmatic, misleading, noodle headed and unworkable as Leninism. There are no private investors that can compete with governments on big investment projects. It’s a myth put about by people who believe that the modern world is the result of entrepreneurs rather than the vast billions of public money that went into everything from roads, to shipping, to the space program. No private industry can compete the Chinese government on the production of steel, anymore than they could compete with post war US spending that allowed many very costly attempts to launch rockets. The argument for private ownership and foreign investments is an argument for retreat and slow decline based on penny pinching.

  • Rolls Royce was supported many years ago by the State when it ran into difficulties. In a massively competitive shrinking field it is now one of only three companies in the world that can design and build a large aero engine. Its all very well to talk about the theory of protectionism but western companies are limited in how they can operate in China and if Steel dumping was a non issue the US wouldnt have a tarrif exceeding 200%. We should support the industry for a timeboxed period of time, perhaps 10 years, nationalise it and take other steps because it truly is strategic. What can be preserved of the industry must move towards more efficient production and higher value production. Left to their own devices the Tories would leave a rotting wasted shell of a country after a couple more terms.

  • Shaun Young 31st Mar '16 - 1:13pm

    I find the whole issue one of double standards – Complaining about China ‘dumping’ cheap steel – Yet, there have been thousands of jobs, especially in the Oil Support Services lost due to OPEC dumping ‘cheap’ Oil on the market, but there has been pursed-lip silence. We can’t have it both ways, but no-one in their right mind is going to suggest we impose tariffs on Oil imports as this will be felt by the public straightaway in higher petrol/transport costs. It also digs Government out of a hole, as cheaper petrol leaves people more money in their pockets.

    I also find it strange that British clothing manufacturers have had to contend with ‘cheap’ clothing imports for years – Yet again if there were increased tariffs imposed there would be an outcry from people if they walked into their local ‘Primark’ and found the £1.99 T-shirt had increased to £4.99 etc, yet there was not talk of supporting this industry.

  • Shaun, the “dumping” that China has been engaged in is selling at 35% below cost price through the Chinese government giving subsidies to the tune of $1 bn per month to producers. That is not the same at all as competition against the UK & Europe at a price where a Chinese producer is covering their own cost plus making a profit.
    This is not the same as what OPEC are doing. They still make a profit on all the oil they sell. They are not dumping at all. The clothing industry was labour intensive not capital intensive. We could not compete on labour cost.
    China is simply holding their steel production level up when there has been a slump in demand, to kill the competition. They will then, in true Capitalist style, maximise their profits when there is a recovery.

  • We should absolutely consider nationalising when in the public interest to do so. Refusing to do so because of the “N-word” is a) small minded and b) the Tory dogma.

    At this point we have thousands looking at losing their jobs, whole areas that look like they could be put under pressure not seen since the coal-mines closed (and how fantastically every single town recovered from that) under the government that apparently triumphs hard working people and the major players who could help were off sunning themselves. They had time to sell off the land registry mind.

  • Tsar Nicholas 31st Mar '16 - 9:23pm

    RBS was bailed out and nationalised by a simple book keeping entry down at the Bank of England – the method was a sort of Quantiative Easing manouevre whereby the money was magicked out of thin air using the inherent credit creation powes of the BoE.

    As I understand things, the same sort of method for bailing out a real industry is forbidden by the Maastricht Treaty (h/t Bill le Breton), so any rescue would have to come out of tax revenues, blowing an even bigger hole in Osbo”s Budget.

  • “The problem is that, as far as Port Talbot is concerned, we don’t know what TATA Steel intends to do. As a global player, why should it sell a plant that could then become a competitor?

    Well there is one critical dimension that is missing from the debate, namely what is TATA doing with respect to it’s operations in other countries and specifically those in mainland Europe. Because if it is uneconomic to continue operations in the UK then one can reasonably assume that its operations in Europe aren’t that far behind. (Although some might suggest that TATA are for the next few months hanging on to their EU operations, just in case the UK decide to exit, because it is likely to be easier to export from the EU to the UK than vice-versa…)

    Because if the real cause of the problem is the downturn in China and Chinese government subsidised over-production, all of TATA’s operations are at risk, hence why they are going to be in a hurry to dispose of the UK operation as the monies being spent on it, are monies that could be spent retaining capacity elsewhere.

    Also given that TATA claim to be Europe’s second biggest producer of steel, perhaps we shouldn’t be looking at this in just a Wales/UK context but also an EU context. Where we can reasonably ask the question is steel making strategic to the EU or not, if it is then the EU will need to come up with some solution that permits the transfer of TATA’s European operations to a state overseen business with government supplied/guaranteed credit lines as it did with the banking sector, but operated more like Directly Operated Railways…

    Because there is one certainty, the government (and the EU) will be paying out regardless of whether they decide to step in and operate TATA Europe or let it shutdown and have to payout benefits and regional development aid.

  • David Allen 1st Apr '16 - 10:33am

    A piece of personal experience. Last year I attended a major German steel conference, as something of an outsider. (They had invited me to talk about how my industry, power generation, used their products.)

    It was an eye-opener. A senior regional politician attended and spoke alongside German industry representatives. All shared a common concern for the problems besetting their industry. All shared in a frank but not antagonistic discussion on how best to tackle the problems. It went without saying that everybody owned the problem, everybody looked for solutions, nobody tried to weasel out of it with comments like Cameron’s “there can be no guarantees”, nobody sought to blame the workers or blame the EU. Indeed, nobody much preached about the dastardly Chinese either, though they did talk about what might practically be done in response to Chinese actions.

    The contrast with Anglo-Saxon state-phobic capitalism is stark. Because Germany has worked with its industry, the Germans don’t now face our two unpalatable options – either spend a bomb on some form of nationalisation, or see the industry shut down.

    The Brexiters, ludicrously, argue that an independent UK could rescue its steel industry. The evidence is that an independent UK would have ditched its steel industry long ago.

    The Brexiters also complain about EU state aid rules. Those rules make sense. They prevent (say) the German state paying subsidies so that it is Italian steel plants which close, and they prevent the Italian state paying subsidies so that German plant will close. If we leave, and seek to trade, the EU will similarly make sure to protect itself against the possibility that a future UK government (with a totally different industrial policy!) might try to subsidise its way back to industrial dominance. The EU will make trading very tough for an independent Britain, for good reasons of their own. Why should they not?

    The Little Brits complain that everybody but LittleBritain finds ways around EU regulations. They imply that it is the dastardly continentals who are cheating. But mostly they aren’t. For example, a “gap” in state aid rules allows a state to fund industrial R&D for the steel industry. So the Germans do a lot of that, while the UK does far less. Then the Brexiters complain that this is unfair. But the remedy is in our own hands. Simply, we could do what the Germans do!

  • Shaun Young 1st Apr '16 - 10:44am

    @Hugh – Many thanks for clarifying, it’s all a bit head-scratchy for me particularly when Britain vetoed the changes the EU wanted to make to the ‘Trade Defence Instruments’ (TDI) regulations – which from my understanding would have enabled penalties/tariffs to have been stricter in respect of Steel? Also, and please forgive my ignorance, although I understand much of the Steel making process is ‘Automated’ at Port Talbot, is that not too still quite ‘labour’ intensive so given the relatively low wage rate ‘comparison’ with a Chinese worker, would there still not be a disparity in the ‘production’ unit cost even after removing the 35% subsidy? So the actual cost would still be cheaper?

  • @John – I suspect part of the GB reasoning was down to the negotiations over Hinkley Point.

    WRT steel, we shouldn’t forget that we contributed to the Chinese expansion by willingly selling our scrap metals to them, rather than reprocessing them locally.

  • I’m still undecided on the EU referendum, but I agree with some of what David Allen saying. However I feel obliged to point out that Britain’s de-industrialisation has happened within the EU and is more to do with the economic orthodoxy of small government and monetarism that have dominated domestic politics since the 1970s.

    I think dragging every issue into a BrExit v BritIn argument is misleading.

  • @David. The lack of any real industrial policy in this Country since the 1980s has left us where we are now with, this week, a balance of trade deficit of 7% of GDP. Some people feel that the way to improve this is to close our steel industry.
    @Shaun. I would not claim to be an expert on the steel industry but the level of coverage and discussion both in the media and by politicians is depressing. If Tata is losing £1m per day on an output of 4 million tonnes pa that equates to about £90 ($125) per tonne. The world price of cold roll steel (the type used in car plants, for example) is around $445 per tonne now. A dire situation? Prior to April 2014 the world price topped $600 for a decade (with dips to $500 in 2006 & 2009, and a peak of $1200 ! in 2008). Not such a bad situation ?
    Over an economic cycle the Port Talbot plant begins to look viable. Only back of an envelope sums with partial information. However, for a small player two years of hefty losses is hard to carry. Especially if the host country is not prepared to spend anything like the $1bn per month that China is investing to “break” competitors. Socialist governments often have deep pockets but this does not mean that their actions are always wise. Could China end up going the same way as Eastern Europe, though for different reasons, debt is debt after all ?

  • David Allen 3rd Apr '16 - 3:34pm

    Glenn, I completely accept your point. What Britain has done with its steel industry has everything to do with British industrial policy, and not with EU policies. However, we could usefully learn from EU nations like Germany how to do things better. It isn’t really about Sajid Javid being away in Australia for a crucial few days. It’s about the Tories being AWOL for the last thirty years!

    Jumping up and down when the industrial heart-attack strikes, playing at Casualty to impress the gullible, and then crying crocodile tears when the steel industry dies anyway, is the Tory game. Contemptible.

  • Javid will have no sentiment in this. His background as a merchant banker will ensure that. He will try for the optimal short term solution, for the Tories, not the UK.
    The suggestions for abandoning the blast furnaces and installing electric arc furnaces (together with an on site generating plant) would seem to be the best chance of salvaging steel production long term. This is what is being suggested by Gupta. The best background reporting I have seen is in the Telegraph. http://www.telegraph.co.uk/business/2016/04/01/steel-tycoon-starts-talks-over-port-talbot-rescue/
    At the West Midlands Regional Conference on 2 April Vince Cable said that “cleaning up” the steel industry by sorting out legacy pension issues was also essential to create a viable future business.

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