Tata to British Steel: The Folly of Pandering to China

By Peter Kennedy / @kennedy121

steelAccording to Tata Steel’s own announcements, the plant at Port Talbot has a maximum of six weeks’ life left in it before being shut down by the company. The lack of urgency on the part of the government (farcically embodied by Sajid Javid’s delayed return from Australia) would be shocking if it wasn’t entirely consistent with the government’s pitiful lack of meaningful industrial policy.

Those opposed to nationalisation of the steelworks have argued that the expense of such a venture makes intervention unviable. They cite the fact that the plant is losing £1m per day, a loss which would need to be absorbed by the tax-payer in the event of nationalisation. Even those such as Vince Cable who argue the government should intervene are calling for the government to under-write the plant’s pension scheme, which should be the sole responsibility of Tata. This echoes the approach followed in the wake of the 2008 banking crisis: profits privatised, losses socialised.

Ignoring the fact those warning against the cost of nationalisation were willing to use all necessary means to solve the banking sector’s (entirely self-inflicted) crisis, the long term economic and non-economic costs of closure of Port Talbot are incalculable. In purely financial terms, welfare payments to laid off workers are estimated to reach £150m (using the crude totalling up of maximum Job Seeker’s Allowance being paid to 40,000 workers, before other benefits and family claimants are considered). This before the myriad human costs are taken into account. As has happened elsewhere when a community’s single employer vanishes, mass unemployment and in turn, community breakdown, mental health problems and substance abuse can all be predicted with depressing surety. As is all too clear from government cuts to welfare for the most vulnerable in our society, these forms of real human suffering rarely figure amongst the present government’s concerns.

Britain for Sale

Although the government’s response to the Port Talbot crisis is well in line with its laissez-faire approach to anything involving the real economy, current inaction in Port Talbot should not be viewed as purely ideologically motivated. There is also a strong geo-political element at work which Labour must shine light upon and challenge: The government’s infatuation with Chinese money.

Since the 2010 general election there has been a huge boom in Chinese investment in the UK. Forecasters expect $5tn of Chinese money to flow into assets on European exchanges in the next three to five years and it is clear the British government wishes to attract as much of that money to the UK as possible, no matter the economic and human costs.

Beijing is set to invest £105bn in the UK between 2014 and 2025, a large proportion of which will be in the property and energy sectors, including some of the UK’s biggest companies. Chinese sovereign wealth funds own a $3bn stake in Barclays bank (Chinese Investment Corporation) and a $2bn stake is held in BP (SAFE Investment Company). The British government has also been extremely keen to push bilateral agreements, most significantly a £14bn in trade deal signed in 2014. In a boon to the Tory’s friends in the City, George Osborne has been breathlessly touting London as the future global trading place for the Chinese Renminbi.

Of course, investment in commercial property and business is one thing but foreign involvement in critical infrastructure projects is a different matter. A key change in government policy since 2010 has been the willingness to not only accept, but promote Chinese investment in key infrastructure projects across the UK. At times this has been decidedly at odds with the democratic process, an ironic twist considering the realities of China’s internal politics. Possibly the starkest example of this is how before parliament has even fully approved HS2 high speed rail, George Osborne is urging Chinese investors to bid for £11.8bn worth of contracts to undertake the first part of the scheme running between London and Birmingham.

Where the US congress has done its upmost to keep the Chinese telecoms company Huawei out of US infrastructure citing the company as a threat to ‘core national security interests’, Britain has allowed Huawei to invest in and operate British infrastructure for over a decade. Whilst the Tory’s talk tough on dealing with threats to British security, warnings by MI5 that allowing BT to use (cheaper) Huawei equipment whilst upgrading its infrastructure was a possible threat to national security were roundly ignored. In response to an Intelligence and Security Committee report on the issue George Osborne issued a statement through the British embassy in Beijing claiming, “I cannot emphasise enough that the UK is open to Chinese investment.”

With regards to steel, recent months have witnessed the disturbing sight of UK ministers travelling to Brussels to argue against higher EU wide tariffs on Chinese steel (which presently stand at a paltry 16%), steel which is now cheaper per tonne than cabbage in China. The UK is therefore pushing policies diametrically opposed to the needs of thousands of its own citizens. One need only contrast this to the US government’s imposition of a 266% import duty on Chinese steel and a 30% duty on UK steel to understand lengths the Tories are going to pander to Beijing.

It is clear that the government has as much concern for British manufacturing and manufacturing workers’ livelihoods as it does the myriad human rights abuses of the Chinese Communist Party. The Tory hierarchy seemingly has no qualms about encouraging investment from such a government. Considering its open door approach to Chinese capital and decision to ignore British intelligence warnings, Tory Party economic policy should now be regarded as a threat to national security. John McDonnell’s attempt to highlight this troubling development during his response to the 2015 Autumn Statement was welcome but sadly ignored in the media fracas following the appearance of Mao’s Little Red Book at the dispatch box.

In the space of two weeks, the government has shown its total disregard for the disabled and now, an entire workforce which has spent decades doing the kind of hard-work the government claims to support when it attempts to mobilise popular support for cutting welfare. What Labour need to make crystal clear is how the Conservatives are creating a Britain in which large sections of the population work in precarious jobs for low pay in the service sector and skilled manufacturing jobs are left to vanish with the whims of global financial markets. A rentier class formed of property tycoons, speculators, international investors and the Chinese politburo is not only allowed, but positively encouraged to extract wealth from the Real Economy on an industrial scale.


Labour Policy: The Need to Innovate and Invest to Secure British Economic Needs

Between 1997 and 2010 a Labour government oversaw the loss of two million manufacturing jobs. Such jobs flooded out of the country (particularly to the Far East) and flagship businesses such as Cadbury’s were readily sold off to foreign firms. The New Labour hierarchy regarded financial and business services as the future, with the loss of jobs in manufacturing a sad, but entirely unavoidable closing chapter in Britain’s long industrial history. New Labour internalised the widespread narrative claiming globalisation was an irreversible process, without taking a longer historical view of the cycles of ‘opening’ and ‘closing’ in global trade and international relations.

Thankfully the current Labour leadership have finally begun to piece together a post-Thatcherite economic policy best placed to face the challenges of the early twenty-first century, including retreats into nationalism and major geo-political uncertainties.

With regard to Port Talbot, Labour has taken the entirely sensible and correct move of calling for nationalisation to keep the plant running until a new buyer can be found. This not only secures a key strategic industry, but would offer peace of mind to thousands of workers and their families who must be under intense emotional and physical stress presently. John McDonnell can use this as another example of where a National Investment Bank would be able to play a strong role investing in British industry and infrastructure – borrowing at historically low rates to invest in not only the steel-works, but the community which has developed around it. Instead of touring China hawking British wares and begging for handouts, the British government would instead be taking the unique opportunity to see key parts of the economy thriving, under British ownership.

Writing in The Mirror last weekend, McDonnell spelled out Labour’s four-point plan to deal with the current crisis in Port Talbot. The fourth point clears the way for innovative approaches to challenges the British economy faces in 2016, which can no longer be dealt with using the outmoded policy tools of the past three decades;

[Labour will] Restructure the industry so it has a future, in partnership with workers, management and major customers working alongside government.

In practical terms the government could and should maintain a stake in the plant, even if it were to be eventually sold off to a private company. This would ensure eventual buyers of the plant would be forced to consider the economic and non-economic needs of the workers and community in their decision making processes. This is the difference between a local stake in the local economy and selling off to foreign (often short term) investors. It is also an opportunity to argue for innovative, non-state forms of investment. Workers’ Solidarity Funds, such as the Quebec Federation of Labour Solidarity Fund are an excellent example of how the government can support innovation in both the public and private sectors. Such worker controlled investment funds have four guiding principles: to invest in suitable companies and provide them with services to create, maintain and safeguard jobs; to support the training of workers to allow them to increase their influence on the economic development of a given region; to stimulate local economies through strategic investments; and to foster awareness and encourage workers to save for their retirement and contribute to the development of the economy by purchasing Fund shares.

As a result, workers have a role beyond the execution of tasks. They gain an insight into the operation of their company and its internal mechanisms, not only in terms of the microeconomics of the enterprise, but also the workplace, the region and the country’s general macro-economic situation. Such a role augments traditional forms of trade unionism, often caught reacting to extremely fast moving events in the face of crises or the short-term, profit oriented outlook of transnational corporations and capital. This is one form of solidarity Labour should be promoting as a means to circumvent practically and challenge ideologically the current government’s short term approach to industrial investment and policy.

Such a policy innovation stands in striking contrast to the plan (or lack thereof) of the Tory government, which is happy to see the country lose what is left of its manufacturing base, no matter how strategically important. The Tories cosying up to the Chinese politburo is one of the bolder ironies of modern British history. It is both interesting and deeply troubling two political parties and governments with diametrically opposed ideological roots can be so strongly linked by their lack of interest in workers’ rights and conditions and the long term flourishing of communities which stand in the way of their own plans. The recent brazen abandonment of both the disabled and skilled workers highlights how urgently the country requires a Labour Party offering a meaningful alternative. Thankfully in the UK we enjoy a democratic system through which we can influence and empower such an alternative if we so choose.


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