Saving our steel means demanding a strategy

By Tom Miller / @TomMillerUK

triple alliance

A plan to nationalise steel was put in place by the Labour government in 1949, but after the defeat of the Attlee government, this was reversed by Churchill’s Tories in office – a reminder that conflicts over policy in our own movement are of lesser significance than who actually holds power. That being said, the issue became one of internal conflict for our party and the wider movement around it.

Calls for the nationalisation of steel were one of the key policy elements of Labour’s left flank in the 1950s. These calls originated with steel workers themselves and were supported by Bevanites and the ‘triple alliance’ of left leaning trade unions – those representing workers in railways, coal and steel.

The thing that these sectors had in common was a shared interest in the strategic importance of heavy industry. Steel production in the UK was eventually nationalised again in 1967 under Harold Wilson, with only one steel company remaining outside of public ownership. From the early 1980s however, the nationalised steel sector was left on its own with obsolescent plants packed with out of date technology, and spread in a way which meant that several operated way under capacity – in other words, inefficiently. This enterprise was loss making, and by privatisation in 1988, the industry had been systematically run down under the Tories – assisted by some unhelpfully restrictive EU rules around state aid.

As such, the earlier decline of steel in Britain formed part of a wider trend in the formative years of neoliberalism – one in which state industries and services were systematically subjected to under-investment as part of a long run in to privatisation. By 1999, British Steel merged with a Dutch company into Corus, and enterprise which was born struggling, and by 2006 it had been bought out by Tata steel in an unusual fashion (in which the investment vehicle used was separated from the rest of Tata’s international business). What had started as a strategic approach to an industry alongside Wilson’s technological white heat had completely jumped the concept of a mixed economy, becoming a directionless private system – run down, lacking strategic context, and far too vulnerable to overproducing competitors in the short term.

Steel dumping

We are now looking at a UK steel industry which is very heavily dependent on Tata, and British production is becoming far less competitive for the private sector due to Chinese dumping. Tata’s share price has halved over 5 years, and it records £2bn of asset impairment (below average profit yield) against

80% of steel production capacity in China is owned and controlled by the Chinese state, driven by Communist Party industrial and trade policy. It is selling surplus steel abroad more cheaply than it does at home and is being deliberately run at over capacity – something diplomacy has been unsuccessful at stopping. Britain imported 826,000 tonnes of steel from China last year. In 2013, this number stood at 361,000 – less than half.

Moreover, the story is not as simple as the EU making things a problem – the steel crisis is not one which only affects us here, but is an EU-wide situation arising as a direct result of Chinese state policy. In other words, is not just seeking to compete in an existing market, but is deliberately investing in steel in order to undermine Europe’s ability to service the steel market.

The EU is not good at understanding or acting on strategic challenges it faces, and has not taken steel dumping sufficiently seriously. But the level of seriousness required has certainly not been met by our own government, a fact which has become highly evident during the ridiculous affairs at Sheffield Forgemasters, as well as the closure of steel production in Redcar.

Whole areas of long term depression are being created to chase a crisis which may last for a few years.

Potential redundancies have been treated callously – the government did not apply for the £5M available from the European Globalisation Adjustment Fund which could already have helped the workers whose lives have been damaged by the loss of steel in Redcar, as well as contributing to some 4000 workers who now face job losses at Port Talbot.

As laughable as this obvious incompetence is, £5m alone is small (tiny) beans.

£500bn was provided by the Brown government to bail out banks in 2008, which the Conservative Party rather hilariously opposed at the time, but now think made sense. The National Audit Office puts total support at £1,163bn since the crisis. The steel sector is worth some £45-46bn to the British economy.

EU law on budget deficits was also deliberately ignored in the case of states such as Greece in order to keep them in and bail them out. Perhaps it is time this was considered for state aid and buyouts in steel.

Support the real economy

Labour and the government face similar and larger questions about steel. Europe is full of examples of states which have intervened in the continent-wide steel decline because they believe that the industry is of strategic importance.

Is ours? The government has been intensely happy to bail out banks, and steel workers have helped to pay for that with their tax contributions. What place does steel have in a national industrial strategy? How can we move the European Union to act on the problem it recognises as posed from China? Is there room to nationalise steel and does it meet the economic outcomes the country needs?

Labour needs to return to the strategic thinking about steel it advanced under Wilson, albeit in a way which focuses on the future. As part of a turn towards a more stable and socially rewarding form of capitalism, we should demand that several key steps are taken to remedy the crisis:

  1. Start properly assessing the social risks and financial costs of losing steel jobs.
  2. Act at a European level to safeguard jobs and provide support and compensation for anyone losing theirs. Make sure that local town and community infrastructure is also adequately funded. Act to relax laws governing state aid and ownership.
  3. Have a procurement strategy. Projects such as high speed rail and other infrastructure projects have rightly been sped up to kickstart the economy. Why can we not see this demand feeding down to projects taking place in Britain? This needs to form part of a wider industrial plan to raise productivity and get the country moving. Steel could be crucial to this.
  4. Consider the nationalisation of the Tata controlled parts of the industry in order to stabilise it. This would at least buy crucial time to address the Chinese dumping issue and reset our own state investment strategy. It also needs to be considered that low Chinese steel prices may be a very temporary phenomenon.
  5. Consider what can be done to put local employees in a position of power over how the industry invests.

Our unwillingness to invest in supporting strategic industries and our heavy reliance on vulnerable, high risk financial services are mutually reinforcing. This in turn helps fuel an economy based on low wages and weak productivity gains. Make steel and steel procurement part of a wider industrial and technological strategy. We need a capitalism that moves back towards capital investment, infrastructure and the ‘real’ economy.

Tom Miller is a founding member of Open Labour and on Open Labour’s Management Committee

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