This Ain’t Tet­ley, Tories

The Economic Times - - The Edit Page - Sudeshna Sen

Tata’s de­ci­sion to fi­nally exit the steel in­dus­try in Bri­tain has man­aged to rip the mask off a deep malaise in the Bri­tish in­dus­trial pol­icy. It has also ex­posed a per­ma­nent fault in the cur­rent gov­ern­ment’s aus­ter­ity poli­cies.

Usu­ally, I’d ex­pect at least some amount of ran­cour against a large for­eign com­pany putting over 15,000 jobs at risk. It’s per­haps a tes­ti­mony to Tata’s track record in Bri­tain that no­body — not work­ers, not unions — have been de­mand­ing its head on a plat­ter. In­stead, the vil­lain of this piece has been cast in steel as the Tory gov­ern­ment, its new in­dus­try min­is­ter Sa­jid Javid, and chan­cel­lor of the ex­che­quer (finance min­is­ter) Ge­orge Os­borne’s ma­nia for China.

There’s wide­spread out­rage that at the time ev­ery­one in the steel in­dus­try knew that the Tata board was meet­ing, and its Bri­tish op­er­a­tions were on the agenda, Javid was in Aus­tralia, later ad­mit­ting that he was taken by sur­prise, and PM David Cameron was on holiday in the Ca­nary Is­lands.

Add that to the fact that Tata’s top bosses were sit­ting in Lon­don for months in ad­vance, and that it’s not the Tata style to give up on some­thing, and the ac­cu­sa­tions about Javid be­gin to make sense.

Un­like his pre­de­ces­sor Vince Ca­ble, Javid has nei­ther the ‘In­dia’ un­der­stand­ing nor the per­sonal re­la­tion­ships that both Ca­ble and Tony Blair’s in­dus­try min­is­ter Peter Man­del­son had.

Be­sides, it’s fairly clear that Cameron and Co didn’t ex­pect Tata to take such an ex­treme step, as it was seen to badly hit their rep­u­ta­tion in Bri­tain. The Tatas have walked away with a rep­u­ta­tion for in­tegrity and hon­our, and pour­ing bil­lions of in­vest­ments into keep­ing the plants go­ing. At the end of the day, it ended up with In­dian share­hold­ers of Tata Steel and lenders sub­si­dis­ing Welsh work­ers, while the work­ers’ own gov­ern­ment not lift­ing a fin­ger to help.

The grouse against the Bri­tish gov­ern­ment has been clear for a while. First, as part of its clean en­ergy pol­icy, en­ergy costs in Bri­tain are among the highest in Europe, mak­ing its steel plants un­com­pet­i­tive. Next, the big­gest prob­lem the global steel in­dus­try has is dump­ing by China. The US has put pro­hib­i­tive anti-dump­ing tar­iffs, but Bri­tain has been at the fore­front of block­ing the EU from do­ing so.

Do­mes­ti­cally, most blame this on Cameron and Os­borne’s ob­ses­sion with China, ‘kow­tow­ing’ to ev­ery­thing Chi­nese. This hasn’t been very pop­u­lar, now that the Chi­nese have put tar­iffs on Euro­pean steel. It’s fairly well known that the Tata man­age­ment has for years been ask­ing the Bri­tish gov­ern­ment for help within the proper EU pa­ram­e­ters. But why would cost-cut­ter Os­borne bother? The Tatas were tak­ing the losses.

Now the gov­ern­ment will prob­a­bly have to foot a much higher bill if it wants any buyer to take over Port Tal­bot: share costs of mod­ernising, re­duc­ing the en­ergy bill and, most crit­i­cally, tak­ing on the enor­mous pen­sion bill that the Tatas in­her­ited from Bri- tish Steel. They’ve also an­nounced they’re go­ing to en­cour­age state en­ti­ties like the Na­tional Health Ser­vice (NHS) to buy Bri­tish.

Duh. If you’d been spend­ing enough on in­fra­struc­ture and boost­ing do­mes­tic de­mand, that’s what you should have done long ago. And no, if the en­ergy pol­icy ob­jec­tive is cleaner steel, then the gov­ern­ment should pay the higher prices for cleaner steel, in­stead of buy­ing the cheap stuff from China.

With 15,000 — and an­other 25,000 more, in the sup­ply chain — work­ers prob­a­bly los­ing their jobs, the ques­tion isn’t whether Bri­tain should or should not have a steel in­dus­try. If these plants shut, the bill in wel­fare alone is enor­mous. More­over, Bri­tain would lose a highly tech­ni­cal skill base (there’s very lit­tle steel pro­duc­tion any­way).

What’s be­come ob­vi­ous is that how­ever Thatcherite Javid wants to be, if gov­ern­ment poli­cies on, say, Chi­nese im­ports or en­ergy prices are di­rectly af­fect­ing a pri­vate man­u­fac­turer’s op­er­a­tions, the gov­ern­ment had bet­ter start tak­ing more re­spon­si­bil­ity.

The Tatas have walked off at the right time. It’s not just about Port Tal­bot or cri­sis man­age­ment. With­out a clear and co­her­ent in­dus­trial and man­u­fac­tur­ing pol­icy — which the Cameron gov­ern­ment does not have — there’s very lit­tle any pri­vate buyer will man­age to achieve.

Boss, how’s busi­ness?

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